Market Down and Dirty
Last Week’s Economic/Market Summary
Data
- 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
- S&P 500 -2.05% Dow -2.21% Russell 2000 -3.32%, Nasdaq -2.59%[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
Conclusion
- 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.
- Growth oriented indices led to the downside with the Russell 2000 losing 3.32%.1
- 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.
- Consumer Discretionary led to the downside as Target, Walmart, & Home Depot all announced earnings last week. 1
- 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
- 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.
- 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
- Fed Reserve Chairman Powell will speak Friday @ 10:05am EST.
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
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