Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- U.S. equities finished lower for the first time in 6 weeks.
- S&P 500 -1.42% Dow -1.67% Russell 2000 -2.89%, Nasdaq -1.43%1
- The All-Country World Index lost -1.93%.1
- S&P 500 sub-sectors were mostly lower last week.
- Utilities & Industrials were the only positive sectors. 1
- Real Estate & Technology led to the downside. 1
- The CBOE Volatility Index (VIX) declined to finish at 13.42, its lowest level in 4 years. 1
- S&P 500 -1.42% Dow -1.67% Russell 2000 -2.89%, Nasdaq -1.43%1
- US Treasury bond yields were mixed last week.
- US 2yr +0.01% at 4.71%, 10yr -0.03% to 3.74%, 30yr -0.04% to 3.82%.1
- The 2/10yr inversion deepened to 1.02% after Jerome Powell’s testimony to congress. 1
- Commodities as an aggregate asset class were slightly higher last week.
- WTI Crude sank -3.18%.1
- Gold declined -1.59%.1
- The US Dollar index rose +0.32%.1
- In our opinion, U.S. economic data continued to be mixed last week.
- Manufacturing data showed continued weakness across the globe. 1
- Measures of the housing market showed upward momentum the past month. 1
- Unemployment claims continued to tick higher in the latest data release. 1
- An index of equities outside the US (FTSE All-World ex-US) slumped -4.51% last week. 1
Conclusion
- US Equities cooled off after a 5-week run of positive weekly returns,
- All major indices were negative last week.
- The small-cap tracking Russell 2000 led to the downside with a loss of -2.89%.1
- This is a turn of events as small-caps were attempting to start a catch-up trade as they’ve underperformed larger companies so far in ’23.
- Interesting to note that retail investors hammered buying stocks to the tune of $4.4 billion the previous week which is a pace that’s in the 1 percentile of the past several years. 1
- S&P 500 subsectors were mostly lower last week.
- Year-to-date underperformers, Utes & Industrials, led to the upside as the only positive sectors.
- Real Estate led to the downside followed by Technology.
- Non-US equities sold off hard last week, underperforming domestic indices.
- Much of this move was led by Chinese equities which were down over 6%.1
- While Chinese authorities have been rolling out measures to stimulate the economy, market reactions have been muted to them thus far.
- We reiterate that if China were to stimulate, it would most likely come following the July Politburo meeting of the Chinese Communist Party.
- Japanese equities continue to lead international markets to the upside as they have their first uptick in inflation in 40 years. 1
- Remarkably, a large number of Japanese companies are still trading below their book value or have very high levels of cash on their balance sheets. 1
- Much of this move was led by Chinese equities which were down over 6%.1
- The US Treasury market saw the 2/10yr yield curve invert further following Fed Chair Powell’s testimony to Congress last week.
- Powell indicated to Congress that more rake hikes are likely this year and said cuts to the Fed’s interest rate policy wouldn’t happen anytime soon. 1
- Additionally, Powell told the Senate Banking Committee on Thursday that “we will do what it takes to get inflation down to 2% over time.” 1
- Economic data from Europe showing a severe drop in corporate purchasing helped longer term gov’t bonds in the US & Europe last week as investors sought these havens. 1
- Commodities moved lower last week, led by a 3% drop in oil. 1
- Oil is trading down around 13% this year1, as the Federal Reserve’s aggressive monetary tightening campaign and China’s lackluster recovery have weighed on the demand outlook.
- Commodities continue to tell the story of weakening demand globally while stock indices continue to point to limited concerns.
- While the bond volatility tracking MOVE index has cut its March spike in half, bullish bets on lower-credit rated high-yield bonds seem to be starting to unravel. 1
- The gap between global investment grade and high yield spreads widened by 0.135% this week, the first widening in six weeks, showing the start of a move to safety. 1
- Investors appear to be turning back to safer fixed income investments in the face of an economic slowdown and rising default rates.
- The gap between global investment grade and high yield spreads widened by 0.135% this week, the first widening in six weeks, showing the start of a move to safety. 1
Ryan A. Mumy, CFP®,
AIF® – Chief Investment Officer
Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net
1 Source: Bloomberg – 6/23/2023
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