U.S. Equities Have Best Week Since June

Market Down and Dirty

Last Week’s Economic/Market Summary

Data

  • U.S. equities rose on the week for their 2nd weekly advance in a row.
    • S&P 500 +2.55% Dow +1.43% Russell 2000 +3.72%, Nasdaq +3.25%[1]
      • The All-Country World Index rose +2.49%.1
    • S&P 500 sub-sectors were mostly higher last week.
      • Tech, Materials, & Energy led to the upside. 1
      • Defensive oriented area of the market struggled.
    • The CBOE Volatility Index (VIX) declined 16.65% to end at 13.07. 1
  • US Treasury bond yields were mixed last week.
    • US 2yr -0.16% at 4.87%, 10yr -0.07% to 4.18%, 30yr -0.01% to 4.29%.1
    • Short-end yields sank on the back of labor market data along with Fed Funds futures.
  • Commodities as an aggregate asset class were mixed last week.
    • WTI Crude gained +7.69%.1
    • Gold was rose +1.31%.1
    • The US Dollar index gained +0.18%.1
  • In our opinion, U.S. economic data continued to be mixed last week.
    • Consumer confidence came in below estimates after rising for 4 months. 1
    • 2nd quarter GDP was revised lower to 2.1% from the initial 2.4% release. 1
    • Measures of the labor market came in below expectations but remain strong. 1

An index of equities outside the US (FTSE All-World ex-US) rose +2.00%.1

Conclusion

  • US Equities had an overall strong week in notching the best week since June.
    • The Nasdaq & small-cap tracking Russell 2000 led to the upside.
    • Equities appeared to get a boost from negative economic data this week seemingly from hopes the economy was heading for a “no landing” or “soft landing” following the Fed’s rate hikes.
    • Sentiment and positioning continue to be far from bearish even though September is typically weak for stocks. 1
  • The often cited Put/Call ratio increasing recently has been lauded as a “gotcha” that market participants by and large are positioned bearishly.
    • This doesn’t appear to be true as large out of range puts, also known as “crash puts”, remain near historically cheap levels. 1
    • We believe this is a result of investors buying put spreads which is 2 contracts and offers protection from minor equity declines, but is not “bearish positioning” per se.
  • S&P 500 subsectors were mostly higher last week.
    • Tech once again led to the upside.
    • The relatively defensive sectors of Staples and Utilities were the only negative sectors in what was a broadly risk on week for trading across the sectors.1
  • US Treasury yields were lower across the curve last week.
    • The 2yr sank on the back of a cooling labor market that is not weakening “too much” in the eyes of investors at large.
    • The 10yr & 30yr saw their rates decline only slightly while the 2yr sank 0.16%.1
      • This steepening of the yield curve by the front-end coming down more than the long-end tends to be normal action historical as peak Fed Funds rate is approached.
  • Measures of the job report showed the labor market undergoing a perceived controlled cooling, illustrated by solid hiring, slower earnings growth, and more people returning to the workforce. 1
    • In theory, the moderation gives the Fed room to pause rate increases this month while keeping options open for another hike later in the year.
  • Non-US equities were positive last week despite a continued strength from the US Dollar.
    • Chinese equities have been the worst performer int’l equities for a month now as foreign investors have unloaded $12.3 billion worth of shares from the Mainland. 1
    • Additionally, investors have been net sellers of European equities for 25 straight weeks. 1
  • Commodities at large produced a large positive week as Oil continued it’s recent strength.
    • Oil has posted 3 consecutive monthly advances thanks in large part to a tightening supply thanks to production cuts from OPEC+.
    • Gold has performed surprisingly week given the strength in the US Dollar and a rise in real interest rates.
      • Traditionally, gold performs well in the opposite environments of these economic measures.
    • Copper rose over 2% to track recent interest rate moves and Chinese stimulus measures. 1
      • We’ll continue to monitor as copper could be setting up for a move higher.

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

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

 1 Source: Bloomberg – 9/1/2023 

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