Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities finished the last week of 2022 slightly lower on expected low volume.
- S&P 500 -0.13% Dow -0.17%, Russell 2000 -0.02%, Nasdaq -0.30%1
- The All-Country World Index declined -0.10%.1
- S&P 500 sub-sectors ended the week mostly lower.
- Energy & Financials were the only positive sectors.1
- Materials & Consumer Staples led to the downside.1
- The CBOE Volatility Index (VIX) rose slightly to finish at 21.63.1
- S&P 500 -0.13% Dow -0.17%, Russell 2000 -0.02%, Nasdaq -0.30%1
- US Treasury bond yields moved higher in the final week of ’22.
- US 2yr +0.10% at 4.41%, 10yr +0.13% to 3.88%, 30yr +0.15% to 3.97%.1
- While the inversion has come down from it’s peak, the 2yr still yields 0.53% more than the 10yr. 1
- Commodities as an aggregate asset class were mixed last week.
- WTI Crude rose over 1%.1
- Gold rose +1.43%.1
- The US Dollar index declined -0.79%.1
- In our opinion, U.S. economic data was mixed last week.
- The US trade deficit for November shrank as imports were much lower than expected. 1
- Wholesale inventories rose to a record level. 1
- The housing markets struggles continued as pending home sales slid & price declined. 1
- An index of equities outside the US (FTSE All-World ex-US) declined -0.16%.1
Conclusion
- US Equities finished a very difficult year with a whimper as markets finished the holiday shortened trading week slightly down.
- The Nasdaq led to the downside with a loss of 0.30% to finish ’22 down -33% for its worst performance since 2008. 1
- The tech & growth oriented areas of the market continue to struggle to overcome rising interest rates which give less of a value today to their future possible growing earnings.
- A weakening outlook for corporate earnings amid recessionary fears continue to act as a headwind to equities in general.
- The Nasdaq led to the downside with a loss of 0.30% to finish ’22 down -33% for its worst performance since 2008. 1
- S&P 500 sub-sectors were mostly negative on the week.
- Energy led to the upside and finished the year as the only positive sector with a gain of 58%.1
- We’re happy to have had sizeable direct exposure to Energy for the entire year which helped our client portfolios’ tremendous outperformance.
- Communications, Tech, Real Estate, & Consumer Discretionary all sank more than 30% in ’22. 1
- Defensive sectors of Staples, Healthcare, & Utilities finished negative but held their ground with losses of less than 4% on the year. 1
- Energy led to the upside and finished the year as the only positive sector with a gain of 58%.1
- US Treasury markets finished a historic year with yields continuing to rise.
- While interest rates finished below their highs of the year, the bond market notched a record annual loss in 2022.
- This was fueled by 40 year high inflation pressures that prompted the Fed to implement the quickest tightening campaign in its history.
- 2022 changes to US Treasury benchmark yields were remarkable:
- 2yr +3.69%, 5yr +2.74%, 10yr +2.36%, 30yr +2.06%1
- Measures of the aggregate bond market lost -13% to -40%.1
- We’re happy to avoided most of the pain in the bond market for our clients by sticking to ultra-short maturities and high credit quality in ’22.
- While interest rates finished below their highs of the year, the bond market notched a record annual loss in 2022.
- The bond market being highly correlated to equities offered investors little to no protection against the macroeconomic backdrop that persisted throughout 2022. 1
- These main themes were high inflation, hawkish monetary policy, & geopolitical unrest.
- In the short run, as a result of technical positioning by large institutions, we could see the markets run higher between now and the end of January.
- We caution investors from getting too excited about short-term price action as the underlying economic data continues to flatline up against hawkish central banks & slowing consumers.
- While stocks have been hit hard and this is now considered a “long bear market”, when comparing vs historical bear markets, one could truthfully say we could be just getting started.
- In our experience, markets won’t just suddenly decide they’ve went down enough and skyrocket higher…it’ll happen when most least expect it.
- We’ll continue to watch the data and lean on the side of capital preservation until the data points to less downside risk in the global economy.
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 12/30/2022
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