Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities ping-ponged while digesting various data points before ending the week slightly down.
- S&P 500 -0.48% Dow +0.12% Russell 2000 -0.17%, Nasdaq -0.39%[1]
- The All-Country World Index was positive +0.51%.1
- S&P 500 sub-sectors were mixed last week.
- Utilities & Consumer Discretionary led to the upside. 1
- Technology led to the downside by a wide margin with a loss of -2.25%.1
- The CBOE Volatility Index (VIX) was down -0.36% to finish at 13.79. 1
- S&P 500 -0.48% Dow +0.12% Russell 2000 -0.17%, Nasdaq -0.39%[1]
- US Treasury bond yields rose last week.
- US 2yr +0.04% at 5.02%, 10yr +0.07% to 4.33%, 30yr +0.09% to 4.42%.1
- The curve bear steepened as the longer maturities rose quicker than the 2yr.
- Commodities as an aggregate asset class were mixed last week.
- WTI Crude gained +3.82%.1
- Gold was declined +0.15%.1
- The US Dollar index gained +0.31%.1
- In our opinion, U.S. economic data continued to be mixed last week.
- US services activity grew more than forecast in the latest data. 1
- The consumer price index came out inline with expectations, yet still above the Fed’s target.
- Jobless claims fell to a 7-month low as the labor market remains tight. 1
- An index of equities outside the US (FTSE All-World ex-US) rose +1.47%.1
Conclusion
- US Equities finished the week mostly negative following a sharp Friday sell-off.
- The Dow Jones Industrial Average was the sole positive domestic major benchmark with a slight gain of +0.12%.1
- Tech sector weakness weighed on the S&P 500 & Nasdaq.
- The small-cap tracking Russell 2000 continues to underperform.
- Russell 2k data is showing weakness barely observed in the last 2 decades. 1
- Small caps are on pace for their 2nd worst underperformance since 1998. 1
- Historically, these stocks have led during periods of recoveries and sold off in times of stress as investors looks to them for cues on the health of the economy.
- Since October of 2022’s lows, only 40% of Russell 2k members are trading above their 200 day moving averages. 1
- That compares with more than 90% having crossed that threshold over the same timeframe when the market was coming out of its Covid-era lows. 1
- Russell 2k data is showing weakness barely observed in the last 2 decades. 1
- The Dow Jones Industrial Average was the sole positive domestic major benchmark with a slight gain of +0.12%.1
- Despite major equity benchmarks being negative, S&P 500 subsectors were mostly positive last week.
- Tech led to the downside by a wide margin with a loss of over 2%.1
- Despite oil shooting higher by almost 4%, Energy equities finished the week lower.
- Utilities led to the upside by a wide margin with a gain of almost 3%.1
- US Treasury yields were higher last week.
- The yield curve bear steepened which is often observed around the end of central bank tightening policies.
- Treasury yields have settled into a tight range this month near the highest levels in more than a decade as data shows a resilient economy and inflation still well above the Fed’s 2% target.
- All eyes will be on the Federal Reserve this week as they have their September meeting.
- Expectations are strongly in the “no-hike” camp with only a 1% probability of a rate hike. 1
- Investors believe the Fed will raise its forecast for growth while indicating another rate hike is on the table for later this year.
- Additionally, the Bank of Japan will meet this week and they continue to hold a wild-card in the global economic landscape.
- When the BOJ decreases their so-called “yield controls” and allows their gov’t bond yields to rise, spillover into all asset classes is anticipated.
- Anticipation on when they do this is hotly debated.
- Expectations are strongly in the “no-hike” camp with only a 1% probability of a rate hike. 1
- CPI numbers for the US came in just about where everyone thought they would with inflation staying elevated. 1
- Expectations for no recession and a soft-landing continue to be strong consensus in market participant’s positioning.
- “The Fed has course corrected and they’re basically on course, but the plane is still well above the landing spot” was post-CPI quote by ex-Treasury Secretary Larry Summers.
- Although we take the opinions of any individual with a grain of salt…the Fed no doubt listens to the voices of certain individuals and thus they can have an impact.
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 9/15/2023
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