Rising Interest Rates, Seasonal Weakness Impact Equities

Market Down and Dirty

Last Week’s Economic/Market Summary


  • U.S. equities declined again last week as rising interest rates and seasonal weakness prevailed.
    • S&P 500 -2.05% Dow -2.21% Russell 2000 -3.32%, Nasdaq -2.59%[1]
      • The All-Country World Index was lower by -2.63%.1
    • S&P 500 sub-sectors were all lower last week.
      • Consumer Discretionary led to the downside with a loss of over 4%.1
      • Energy, Healthcare, & Utilities were the only sectors not down over 2%.1
    • The CBOE Volatility Index (VIX) rose 16.44% to end at 17.28. 1
  • US Treasury bond yields moved higher last week.
    • US 2yr +0.03% at 4.92%, 10yr +0.10% to 4.26%, 30yr +0.11% to 4.38%.1
    • The 30yr Treasury yield touched 4.42% last week which is a 12 year high. 1
  • Commodities as an aggregate asset class were negative last week.
    • WTI Crude declined -2.18%.1
    • Gold was down -1.28%.1
    • The US Dollar index gained +0.57%.1
  • In our opinion, U.S. economic data continued to be mixed last week.
    • Measures of retail sales & consumer spending came in above expectations. 1
    • 30-year mortgage rates soared above 7% to touch their highest levels since 2002. 1
    • Industrial & Manufacturing data surprised to the positive. 1
  • An index of equities outside the US (FTSE All-World ex-US) declined -3.11%.1


  • US Equities declined as higher interest rates seemed to weigh on investor sentiment.
    • Growth oriented indices led to the downside with the Russell 2000 losing 3.32%.1
      • Interesting to note that of the small-cap index constituents, 45% of them were unprofitable as of the quarter ending March 31st. 1
    • The S&P 500 slumped over 2% and has finished lower in 12 of the last 14 sessions in August. 1
      • With this move, the S&P dropped below its 50-day moving average for the 1st time in more than 3 months. 1
    • Under the surface, positioning has changed dramatically in the last few weeks.
      • After spending much of the last few months with a derivative-driven tailwind, the markets now face positioning of the opposite.
      • Following the large options expiration last week, markets are now positioned in a much more defensive stance in which market liquidity has eroded a great deal.
  • S&P 500 subsectors were all firmly lower last week.
    • Consumer Discretionary led to the downside as Target, Walmart, & Home Depot all announced earnings last week. 1
      • While all of them reported profits that exceeded expectations for the last quarter, corporate executives sounded notes of caution about the months ahead.
  • US Treasury yields rose across the board last week with the 30yr rising the most.1
    • For the most of the past two years, Treasury yields were led higher by short-dated maturities in anticipation of Fed interest-rate increases that have totaled more than five percentage points.
      • Over the past month, though, long-maturity yields have taken the baton as focus has shifted to the labor market’s refusal to buckle, a still-elevated inflation rate, and an expanding supply of new Treasuries sold to close a growing federal budget deficit. 1
  • Non-US equities underperformed domestic measures as Chinese economic concerns & a strong US Dollar provided tailwinds.
    • The US Dollar notched its 5th weekly gain, its longest run in a year. 1
    • Many companies exposed to China are sounding alarms in their latest earnings releases.
      • An MSCI index that tracks global companies with the biggest exposure to China has retreated about 10% this month, double the decline in the broader gauge. 1
  • All eyes will be on the Jackson Hole Economic Symposium this week.
    • Fed Reserve Chairman Powell will speak Friday @ 10:05am EST.
      • Remember last year equity markets famously dropped 10% in the 10-minute speech he delivered.
    • While we don’t have a Fed meeting this month, there is only currently an 11% chance of a rate hike being priced in by market participants. 1
      • If Powell gives hawkish signals like at last year’s Jackson Hole speech, expect some fireworks in the interest rate markets as positioning is not anticipating this.
    • This also comes at a time when measures of volatility in the equity markets have finally risen to be inline with those of the bond market for the first time since March. 1

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net 

 1 Source: Bloomberg – 8/18/2023 

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