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Weekly Market Commentary | May 12, 2022
There is a lot of uncertainty in financial markets – and markets hate uncertainty.
In recent weeks, economic and financial market data have been telling different stories – and that makes it tough for investors to know where the United States economy is headed. Since stock markets move up and down based on what investors think will happen in the future, markets have been volatile. Here are some of the issues that have contributed to recent uncertainty.
Last week, the Fed continued its fight against inflation by raising the fed-funds target rate by 0.50 percent. On Wednesday, investors welcomed the move and U.S. stock indices moved higher. On Thursday, they changed their minds and markets dropped lower. “US stocks appear to be on a permanent rollercoaster ride as investors debate continued signs of a strong economy alongside rising rates,” stated a source cited by Barron’s.
Bond yields have risen along with interest rates. At the end of last week, the 2-year U.S. Treasury note yielded 2.72 percent and the benchmark 10-year U.S. Treasury yielded more than 3 percent. Higher bond yields are likely to affect stock markets, too, as investors can now find opportunities to invest for income with less risk.
Last week, major U.S. stocks indices moved lower. The Nasdaq Composite Index is in bear market territory (down 20 percent or more), and the Standard & Poor’s 500 Index is down 14 percent year-to-date with almost half of the stocks in the Index down 20 percent or more, reported Ben Levisohn of Barron’s.
Sources:
https://www.bea.gov/sites/default/files/2022-04/gdp1q22_adv.pdf
https://www.bls.gov/news.release/empsit.nr0.htm
https://www.cnbc.com/2022/05/06/job-growth-and-wages-were-strong-in-april-but-some-workers-just-disappeared.html
https://www.barrons.com/articles/stock-market-today-51651825141?mod=Searchresults (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/05-09-22_Barrons_The%20Dow%20Dropped%20Again%2c%20Jobs%20Growth%20Was%20Strong_4.pdf)
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202205
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/05-09-22_Barrons_Overview_6.pdf)
https://www.barrons.com/articles/bear-stock-market-fed-china-51651870728?mod=read_next (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/05-09-22_Barrons_This%20Stock%20Market%20Feels%20Like%20a%20Bear_7.pdf)
https://www.goodnewsnetwork.org/2-in-3-us-business-owners-are-currently-living-american-dream/
https://www.xero.com/content/dam/xero/pilot-images/campaign/us-smb-survey/small-business-%20week_Infographic-new-american-dream.jpg
https://www.irs.gov/newsroom/irs-selects-new-leadership-for-small-business-and-self-employed-division
https://cdn.advocacy.sba.gov/wp-content/uploads/2022/04/22141927/Small-Business-Job-Creation-Fact-Sheet-Apr2022.pdf
https://www.goodreads.com/author/quotes/12115.Ansel_Adams
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Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
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* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
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