Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary


  • U.S. equities moved lower last week as hawkish central banks seemed to weigh on investors.
    • S&P 500 -2.55% Dow -1.66%, Russell 2000 -2.38%, Nasdaq -2.77%1
      • The All-Country World Index declined -2.17%.1
    • S&P 500 sub-sectors ended the week all lower except Energy.
      • Energy was the sole gainer with a return of +2.03%.1
      • Consumer Discretionary led to the downside with a loss of almost 4%.1
    • The CBOE Volatility Index (VIX) managed to decline last week by -1.53% to end at 22.48. 1
  • US Treasury bond yields moved lower last week.
    • US 2yr -0.16% at 4.17%, 10yr -0.09% to 3.48%, 30yr -0.03% to 3.53%.1
    • The bond market continues to be at odds with the Federal Reserve’s forward projections.
  • Commodities as an aggregate asset class were modestly higher last week.
    • WTI Crude rose +4.83%.1
    • Gold was -0.26%.1
    • The US Dollar index was flat at -0.02%.1
  • In our opinion, U.S. economic data was mixed last week.
    • The Fed raised rates 0.50% as expected and increased their future outlook for peak rates. 1
    • November consumer prices rose less than expected but are still up 7.1% in a year. 1
    • Retail sales & manufacturing data both missed expectations. 1
  • An index of equities outside the US (FTSE All-World ex-US) lost -1.87%.1


  • US Equities suffered their longest losing streak since September as global central banks’ hawkish tones seemed to grab the attention of investors.
    • Investors had cheered softer than expected inflation data earlier last week, but the euphoria faded as Fed chairman Powell hammered home the message that rates will go higher for longer until they’re confident inflation has been subdued.
    • While the Fed raised rates at the expected 0.50% level1, equities were put on their back foot with forward projections for the Federal Reserve’s peak rate being higher than market anticipations.
    • This was followed by the European Central Bank’s rate hike and ECB President Lagarde’s admission that they “have more ground to cover, we have longer to go” 1 as compared to the Fed.
    • Pile on this the flurry of US data last week that showed the economy is cooling and you’ve got the anti-Santa rally outcome we saw.
  • S&P 500 sub-sectors were all down outside of Energy.
    • Energy gained but still is sitting at a historic divergence when compared to the price of crude.
      • As we’ve discussed numerous times, this gap should close…most likely to the tune of energy equities moving lower.
    • Consumer Discretionary led the way lower as retail sales in November missed estimates. 1
      • Financials, Materials, Real Estate, & Technology all lost north of 2%.1
  • Non-US equities moved lower last week with a loss of -1.87%.
    • China stocks rebounded slightly as the CCP loosens Covid restrictions.
      • While this could be good for Chinese equities, the road to recovery is likely bumpy as the nation struggles with disruptions from Covid waves & a property market in freefall.
    • Europe seems to be behind the US in peak inflation as stated by European Central Bank President Lagarde when she said “Anybody who thinks that this is a pivot for the ECB is wrong.” 1
      • The ECB also laid out plans for their version of Quantitative Tightening (QT).
      • We could see massive increases in borrowing costs for European nations as a result.
  • US Treasury yields moved lower across the maturity curve as market participants continue to be at odds with what the Federal Reserve is stating their path with be.
    • Despite the Fed’s forward projections (dot plot) that implies a final Fed rate of 5-5.25%, and Chair Powell’s insistence that the Fed will hold the policy rate at high levels for some time1, markets have chosen to ignore this messaging.
      • It appears investors are either expecting Fed easing because of a fairly rapid return to “normal” levels of inflation or are placing fairly high odds of a recession shortly after the peak that would cause the Fed to reverse course quickly.
    • We remind readers of our continued belief that the risk for the Fed is cutting too soon as opposed to tightening too much.
      • Fed Chair Powell has reiterated this sentiment in various manners.
      • This is the polar opposite of the past 2 decades of Fed action so using a historical playbook may not serve investors well.
      • As the old axiom goes “Don’t fight the Fed.”
  • We remain patient & cautious and will continue to let the data lead the way in our process.

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

Contact: 828/855-9400 or 

 1 Source: Bloomberg – 12/16/2022  

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