The Data
Equities were mostly lower last week.
S&P 500 -0.59% Dow -1.82% Russell 2000 -2.45%, Nasdaq +0.34%.[1]
The All-Country World Index declined -0.87%.1
S&P 500 sub-sectors were all lower last week outside of Technology & Cons Discretionary.
Technology rose +0.74% while Consumer Discretionary rose +1.16%.1
Utilities, Materials, & Real Estate led to the downside with losses over 2%.1
The CBOE Volatility Index (VIX) rose on the week to end at 13.73.1
US Treasury bond yields moved higher last week.
US 2yr +0.15% to 4.25%, 10yr +0.25% to 4.40%, 30yr +0.27% to 4.61%.1
Bonds had their worst weekly performance in 2 months on the spike in yields.
Commodities as an aggregate asset class declined last week.
WTI Crude rose +5.73%.1
Gold gained +0.56%.1
The US Dollar index advanced +0.83%.1
In our opinion, U.S. economic data was mixed last week.
The Small Business Optimism Index soared to its highest reading since 2021.1
The CPI inflation index rose +2.7% as expected as Core CPI remained at +3.3%.1
Measures of producer price inflation rose more than expected.1
An index of equities outside the US (FTSE All-World ex-US) moved lower at -0.97%.1
Conclusion
Equity indices were lower last week outside of the Nasdaq.
The Nasdaq rose for the 4th straight week with a gain of +0.34%.1
The S&P 500 declined -0.59% snapping a 3 week winning streak.1
The small-cap tracking Russell 2000 continued its underperformance as it led to the downside with a loss of -2.45%.1
While indices have been mixed thus far in December, under the surface, participation is breaking down.
There hasn’t been a single trading session in December where more stocks in the S&P 500 have gained than declined.1
This is the longest such streak in 20 years.1
Additionally, measures of sentiment are extremely stretched.
A gauge of risk-on positioning and sentiment which plots flows to everything from equity futures to bullish stock options, just hit the highest level since 2018, with more than half its indicators at notably elevated levels.1
We note that similar readings in the past have preceded a pullback.
This also coincides with realized volatility reaching a point where it may be difficult to fall further which could take away a tailwind of equities.
US interested rates shot higher last week on the back of stronger than expected economic data.
An index that tracks longer maturity US Treasuries declined over 4% on the week.1
The benchmark 10-year US Treasury yield rose to 4.4% while the 2yr rose to 4.25%.1
The 2yr is reflecting decreased odds of continued Federal Reserve rates cuts beyond this month’s expected 0.25% reduction while the 10yr is pricing in higher sustained inflation.
Non-US equities declined last week as the US Dollar continued its torrid rise.
The greenback rose +0.83% last week and is now up 3.5% since the November election.1
The index tracking ex-US equity performance has underperformed the S&P 500 by almost 20% so far in 2024.1
Much of this can be attributed to China’s spiral into deflation and their collective struggle to get their economy moving higher.
Prices in China, the world’s 2nd largest economy, have declined for 6 consecutive quarters.1
While policymakers have pledged to do more to shore up growth, it has not been enough thus far to attract new capital from market participants.
Justin Greenhill - Chief Investment Officer – justin@sollinda.com
Ryan A. Mumy, CFP®, AIF® - CEO – ryan@sollinda.com
Phone: 828-855-9400
[1] Source: Bloomberg – 12/13/2024
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