Economic Market Summary

Market Down and Dirty

Last Week’s Economic/Market Summary


  • U.S. equities ended the week mostly lower as participants continue to play chicken with the Fed.
    • S&P 500 -0.66% Dow -2.70%, Russell 2000 -1.07%, Nasdaq +0.55%1
      • The All-Country World Index declined -0.26%.1
    • S&P 500 sub-sectors were mostly lower last week.
      • Tech & Energy were the only positive sectors with gains just above 0.5%.1
      • Utilities, Staples, & Industrials led to the downside with losses around 3%.1
    • The CBOE Volatility Index (VIX) rose slightly but still finished below 20. 1
  • US Treasury bond yields mostly moved lower as the curve steepened.
    • US 2yr -0.08% at 4.14%, 10yr -0.01% to 3.48%, 30yr +0.05% to 3.66%.1
    • A sharp decline in yields over the past 6 weeks is mainly due to falling inflation expectations.
  • Commodities as an aggregate asset class was slightly higher last week.
    • WTI Crude gained +1.58%.1
    • Gold rose +0.29%.1
    • The US Dollar index declined -0.21%.1
  • In our opinion, U.S. economic data was mixed last week.
    • The latest data showed business conditions weakening and inflation continuing to moderate. 1
    • Producer Prices dropped 0.5% for the month as gas & food prices helped lead to the decline. 1
    • Retail sales for December dropped more than expected & existing home sales slid further. 1
  • An index of equities outside the US (FTSE All-World ex-US) rose by +0.74%.1


  • US Equities were mostly lower last week despite a Friday rally as some Fed officials dialed back fears of staying overly aggressive on rate hikes.
    • The tech-heavy Nasdaq led to the upside and finished the week up +0.55%.1
    • All other major indices were negative on the week, led by the Dow Jones Industrial Average which lost almost 3%.1
      • Interesting to note that a gauge of the most shorted stocks tracked by Goldman Sachs rose almost 5% last Friday. 1
    • The overall dominant market theme continues to overwhelmingly be participant positioning vs the Federal Reserve’s communicated path of tightening.
      • Equity valuations are currently pricing in a very low probability of a recession.
      • The bond market is pricing in substantial Fed rate cuts this year.
      • We don’t believe we need to “pick a side” and can continue to watch & wait patiently.
    • Regardless, we continue to watch as our near-term trend & momentum signals are currently bullish on the S&P 500 although longer-term signals are neutral to bearish; our gamma inputs remain negative.
  • S&P 500 sub-sectors were mostly negative on the week.
    • Pro-cyclical areas of tech & energy led to the upside.
    • Traditionally defensive sectors led to the downside along with Industrials.
    • Recent price action for sectors has not been inline with what has historically been the case leading up to or during a recession. 1
  • The CBOE Volatility Index (VIX) ended the week higher, yet closed below the critical 20 level. 1
    • Interesting to note that the prevalence of short-dated call options (same day expiration) was near 50% of all traded options last Friday. 1
    • Structurally, when this happens, it forces dealers to buy the underlying stocks of the options.
      • We believe this hedging activity is in part what boosted equities on Friday as opposed to some dynamic shift in the forward outlook or positioning by participants.
  • Overall, economic data continues to weaken outside of the labor market.
    • While tech firms have laid off thousands of workers, the rest of the job landscape remains extremely resilient with jobless claims totaling less than 200k last week. 1
    • This appears to be keeping the economy rolling despite other economic measures showing overwhelming downward momentum.
    • The latest data set to soften is retail sales.
      • With back-to-back declines in retail sales, there is a clear softening in the consumer. 1
      • This is important because consumption represents the lion’s share of the US economy, suggesting economic growth may be on tough footing as we start 2023.
  • For Q4 2022 (with 11% of S&P 500 companies reporting actual results), 67% of S&P 500 companies have reported a positive earnings surprise and 64% of companies have reported a positive revenue surprise. 1
    • If earnings do not collapse more than expectations then stocks could be called “cheap” near-term as underweight participants chase them higher.

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

Contact: 828/855-9400 or 

 1 Source: Bloomberg – 1/20/2023 

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