Rmumy
Jan 23 min
Updated: 3 days ago
Equities scored their 3rd straight weekly advance.
S&P 500 +1.87% Dow +2.16% Russell 2000 +1.19%, Nasdaq +1.14%.[1]
The All-Country World Index rose +1.66cl1%.1
S&P 500 sub-sectors were all higher last week.
Utilities & Materials led to the upside.1
Consumer Discretionary was the worst performer at +0.11%.1
The CBOE Volatility Index (VIX) declined by 7% to end at 12.55.1
US Treasury bond yields were little changed last week.
US 2yr +0.06% at 4.87%, 10yr flat to 4.50%, 30yr -0.02% to 4.64%.1
The bond market continues to digest fresh economic data and was tame last week.
Commodities as an aggregate asset class were higher last week.
WTI Crude was flat at +0.08%.1
Gold rose +2.52%.1
The US Dollar index increased +0.27%.1
In our opinion, U.S. economic data was mixed last week.
University of Michigan consumer sentiment came in lower than expected.1
Initial jobless claims came in slightly ahead of expectations.1
Mortgage applications rebounded to come in ahead of expectations.1
An index of equities outside the US (FTSE All-World ex-US) gained +1.19%.1
Stocks completed another week of strong gains as the stress-release valve of investors seems to have been pressed.
The Dow Jones Industrial Average led to the upside with a gain over 2.1%.1
All major indices were higher but small-caps & the Nasdaq were the weakest performers at just over +1.1% on the week. 1
As anticipated, volatility continued to decline with the VIX index closing down 7% which acts as a lift to equities in general. 1
Appetite to hedge against a stock crash has hit a nine-year low by one measure with fear fading across the options landscape big and small, from equity to fixed income. 1
It’s a sentiment shift of sorts from the higher-for-longer monetary anxiety last month that spurred investors to bid up downside protection as equity volatility rose.
S&P 500 subsectors were all higher.
We’re beginning to see cyclical areas of the market show some strength.
This would be a character change under the surface.
US Treasuries saw a whole lot of nothing last week.
Yields have been largely driven by economic data this year and last week was light on the data release front.
This week includes the release of the April consumer-price index on Wednesday. 1
This is poised to be the biggest test of the rally that started this month when Fed Chair Powell swatted away worries that the central bank may raise rates again.
This year’s previous CPI reports fueled bond-market selloffs as faster-than-expected readings fanned worries that the Fed’s gains against inflation have stalled.
More than half of the 0.60%+ jump in the 10 year US Treasury benchmark rate this year occurred on days when the CPI was released. 1
As discussed above, all eyes will be on the CPI inflation date this week.
Despite inflation being higher than expected, most of the data contributing to that is lagging data or unique, situational data.
All of these metrics have one thing in common — they are telling us about events that happened in the past and are unlikely to repeat over the next year.
While many can point to the decline in oil prices from 2022 to 2023 and note that it is unlikely to repeat, almost nobody is highlighting that automobile insurance costs are unlikely to continue to rise by 22% next year.
With inflation on the retreat outside of key areas; the question is will the Fed get to do multiple cuts before the economy rolls over?
Justin Greenhill - Chief Investment Officer – justin@sollinda.com
Ryan A. Mumy, CFP®, AIF® - CEO – ryan@sollinda.com
Phone: 844/662-1211
[1] Source: Bloomberg – 5/10/2024