Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities finished the week higher across the board.
- S&P 500 +1.88% Dow +2.02% Russell 2000 +3.33%, Nasdaq +2.04%
- The All-Country World Index declined +1.7%.
- S&P 500 sub-sectors were all up last week.
- Consumer Discretionary, Materials, & Real Estate led with gains over 3%.
- Defensive Utilities & Staples were the worst performers gaining just under 1%.
- The CBOE Volatility Index (VIX) dropped 7% to end the week @ 14.60.
- S&P 500 +1.88% Dow +2.02% Russell 2000 +3.33%, Nasdaq +2.04%
- US Treasury bond yields were lower last week across the yield curve.
- US 2yr -0.04% at 4.50%, 10yr -0.11% to 3.69%, 30yr -0.08% to 3.88%.
- Yields fell on renewed hope of the Fed pausing rate hikes.
- Commodities as an aggregate asset class were flat last week.
- WTI Crude declined 1.28%.
- Gold was flat.
- The US Dollar index gained +0.03%.
- In our opinion, U.S. economic data continued to be mixed last week.
- Non-farm payrolls surged last week, beating expectations by a wide margin.
- Consumer confidence continued its recent trend lower.
- Home prices are rising again despite rising mortgage rates & low supply.
- An index of equities outside the US (FTSE All-World ex-US) rose +1.1% last week.
Conclusion
- US Equities rose higher across the board last week as major indices continued to be powered higher by mega-cap tech companies.
- The Nasdaq jumped 1.8% for it’s 6th straight weekly gain.
- Small-caps, comprised mostly of energy cos & banks, shot higher by 3.3% as short-sellers were forced to cover.
- Small-caps still lag large-cap growth benchmarks by the most in nearly 2 decades.
- We continue to believe that unless gains spread out further beyond the largest tech companies, this rally has little chance of continuing.
- However, if breadth does expand, some unbelievable opportunities for catch-up trades could be presenting themselves.
- In May, the Russell 1000 Value Index fell 4% while the Growth counterpart rose about 4%.
- This monthly outperformance is the biggest spread between the two since 2000.
- So far in 2023, the 23% difference in favor of Growth is the largest in 44 years.
- This monthly outperformance is the biggest spread between the two since 2000.
- S&P 500 subsectors were higher across the board last week.
- Outside of Tech & Consumer Discretionary, many year-to-date laggards caught some upside last week as short-sellers were forced to cover.
- If this continues, this would present the evidence that breadth is spreading and these laggards could rocket higher, catching up to the megacap 2023 leaders.
- We’re watching this dynamic very closely.
- Outside of Tech & Consumer Discretionary, many year-to-date laggards caught some upside last week as short-sellers were forced to cover.
- US Treasury yields were lower across the yield curve last week.
- Dovish Fed speakers who mentioned favoring a pause next meeting helped drive the 2yr yield lower.
- Traders are now expecting one more rate hike between the Fed’s June & July meetings.
- Longer term bonds saw yields come lower as investors seemed to snatch up the higher yields in anticipation of an eventual Fed pivot to loosening that would drive yields lower.
- Dovish Fed speakers who mentioned favoring a pause next meeting helped drive the 2yr yield lower.
- Despite the Fed speakers dovishness, the latest US jobs data from last week presented conflicting signals for Jerome Powell’s Fed.
- Hiring exceeded expectations while the unemployment rate rose.
- Additionally, job openings unexpectedly surged in April to the highest in 3 months and the number of vacancies increased.
- In our opinion, this puts the Fed in a tough spot as if they pause, inflation could come roaring back while if they over tighten, they risk “breaking something”.
- The CBOE VIX index (fear gauge) dropped to its lowest level since January of 2020.
- This is despite all the underlying economic weakness and large divergence in year-to-date performance of the various components of the equity markets.
- So far this year, the Info Tech aspect of the S&P 500 has outperformed the entire 500 index by the widest margin on record.
- With tech stocks up over 30%, non-tech stocks are basically flat so far this year.
- We reiterate that healthy bull markets aren’t driven by so few components.
- However, If these dramatic underperforming sectors start participating, there could be an opportunity for a large catch-up to the Tech area of the market.
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 6/5/2023
Disclosures: The information provided in this paper is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal or tax advice. Capital Investment Advisory Services, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of or reliance on the information. This information is subject to change and, although based on information that Capital Investment Advisory Services, LLC considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data suppliers. For investment related terms definitions, please visit: www.investopedia.com Past performance is no guarantee of future results. Additional information about CIAS and its Form ADV Part 2A are available on the SEC’s website at www.adviserinfo.sec.gov Advisory services through Capital Investment Advisory Services, LLC Securities may be offered through Capital Investment Group, Inc. Member FINRA/SIPC Both firms located at 100 E. Six Forks Rd. Suite 200, Raleigh, NC 27609 919-831-2370