Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary


  • U.S. equity indices were higher during the holiday shortened trading week with low volumes.
    • S&P 500 +1.59% Dow +1.78%, Russell 2000 +1.01%, Nasdaq +0.72%1
      • The All-Country World Index rose +1.47%.1 
    • S&P 500 sub-sectors ended the week higher across the board.
      • Utilities led to the upside with a gain of 3.04%.1 
      • Energy was the weakest performer at a gain of +0.28%.1 
    • The CBOE Volatility Index (VIX) got crushed lower by 11.33% to 20.50. 1 
  • US Treasury bond yields were lower last week as the yield curve inverted further.
    • US 2yr -0.09% at 4.42%, 10yr -0.14% to 3.68%, 30yr -0.18% to 3.74%.1 
    • With short rates holding steady, the inversion has intensified to the most in 4 decades. 1 
  • Commodities as an aggregate asset class were lower last week.
    • WTI Crude declined -4.80%.1 
    • Gold rose -0.24%.1 
    • The US Dollar index declined -0.81%.1 
  • In our opinion, U.S. economic data was mixed last week.
    • Fed minutes showed a desire to slow pace of rate hikes but indicated a higher end rate. 1 
    • Jobless claims rose to a 3 month high, showing signs of the labor market cooling down. 1 
    • Initial black Friday results showed spending up 2.3% over last year thanks to flex payment plans. 1 
  • An index of equities outside the US (FTSE All-World ex-US) gained +1.53%.1 


  • US Equities ended the week higher after investor sentiment was booked by the Fed minutes confirming a slowing pace of rate hikes.
    • The Dow & S&P 500 led to the upside with gains over 1.5%.1 
    • We believe much of the gains last week were driven by the VIX getting smashed lower by traders which causes an “all ships rise” type price action. 
  • S&P 500 sub-sectors were all positive on the week.
    • Utilities, Materials, Financials, & Staples all returned over 2%.1 
    • Energy was the sole sector that didn’t gain over 1%.1
      • Energy has been disconnecting from the underlying price of crude oil for some time now and could face near-term headwinds if crude trades flat to lower. 
      • We don’t believe this changes the underlying supply-restriction “fueled” set-up for the energy sector to possibly continue to outperform over the next several years. 
  • The US Treasury market saw yields move lower across the maturity curve last week.
    • Of most importance has been the trend in rates of late as the short-end, most influenced by Fed policy, has held up while the 10yr & 30yr issues have dropped substantially. 
    • This inversion (short maturities yielding more than the longer ones) is the most substantial in over 40 years. 1
      • Using history as a guide…inversions of this magnitude & length rarely paint a rosy picture of the economy moving forward. 
      • Despite how loud or how often someone points to other data points, we don’t think this point can be ignored. 
    • Much of this is being driven by future expectations for Federal Reserve policy.
      • While the Fed has continued to reiterate “higher for longer” with its Fed Funds rate, investors in the futures market as betting on the Fed moving rates lower much sooner than they’re currently indicating. 
  • Fed tightening has led to an increased cost of capital for companies and lower equity valuations.
    • The S&P 500 price to earnings multiple has come down from 21x to 17x. 1 
    • While this is a sizeable drop, it is still at the high end of historical valuations of the S&P. 
  • Interesting to note that in this environment, there’s been a rush to high-yield or junk bonds by investors.
    • This fringe & riskier part of the credit markets has drawn its biggest passive inflow on record. 1 
    • The spread between intermediate US treasuries and high-yield corporate debt is hovering around the low end of its range. 
  • The S&P 500 has experienced 41 one-day moves of 5% or more (+ or -) since 1990. 1
    • Only one of them has failed to produce a 2% move in the following 10 days & that one would be the stretch from CPI day to last Friday. 
    • Starting with Nov 30th, we will see a slew of data that likely determines the market trend through the end of the year. 
    • Unfavorable reactions to the data out this week could spark a nasty downside move for structural reasons we’ve been talking about for many weeks. 

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

Contact: 828/855-9400 or 

 1 Source: Bloomberg – 11/25/2022  

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