Market Synopsis: Equities down, Treasury Yields up, Commodities down, Dollar up, Crypto down
Past Week Events:
- The Federal Open Market Committee (FOMC) in charge of determining monetary policy released its minutes on from its previous meeting Wednesday. The minutes revealed a hawkish fed that has yet to accept the idea that inflation has been beaten. The “Fed pivot” narrative of a potential slow down in inflation rates was thrown out the window as terms like “pause” or “disinflation” were not even mentioned. Investor's optimism was previously set high by Powell’s somewhat Dovish tone. This report sent markets tumbling lower on the week.
- Gross Domestic Product numbers came in this week on Thursday. GDP serves as a measure of the strength of the economy as it illustrates the number of goods and services produced within the country. GDP only rose 2.7 percent in the fourth quarter which is lower than the previous expectation of 2.9 percent. This growth is still relatively strong, but the miss in expectations was due to slower consumer spending. This report, however, did not convince investors of a cooling economy as it seems inflation concerns are running rampant now especially accentuated by the following point.
- PCE or the Personal Consumption Expenditures Price Index which serves as another measure of inflation was released this Friday. The index shocked investors as it illustrated a spike in inflation. With the release of the numbers, markets tumbled quite dramatically in pre-market trading.
- Consumer Confidence is released next week. Consumer confidence indicates whether consumers are spending less or more. With inflation being high, consumer confidence is still relatively very low, but because the Fed has been hiking interest rates consumer confidence has been slowly reverting upwards. The last PCE and CPI report indicated a slight spike in inflation despite raised rates, and this may impact next week’s consumer confidence.
- The Federal Reserve Board of Governors consists of seven members who are selected on the highest level. They oversee the activities of the Federal Reserve in order to achieve the Federal Reserve’s mandates. Three governors of the seven will speak next week. These are very anticipated conferences for investors.
Market Snapshot:
- Markets had a tumultuous week as the last embers of hope for a “Fed pivot” were extinguished with the hawkish tone from the FOMC and PCE data this friday. To put it simply, investors began the year with the idea that the economy was slowing and inflation was receding and the Federal Reserve would loosen monetary conditions in response. This would in turn boost the economy and markets. However, with this week's and the previous week’s inflation data optimism soon faded. The data from PCE further highlighted what CPI demonstrated. It seems that investors are beginning to recognize that the battle against inflation is far from over and there is still an uphill battle.
Quip of the Week: “Why did the investor break up with his stockbroker?
- Because he lost interest!”
U.S Equities:
Indexes(Week)
- SPX 3,970.04(-2.67%), DJIA 32,816.92(-2.99%),
- NASDAQ 11,394.94(-3.33%), RUT 1,890.49(-2.87%)
Sectors
- Every sector was in the red this week with the exception of energy which was able to make out with a very minor gain. As expected, due to inflation expectations and concerns reappearing in the minds of investors, Consumer Discretionary dropped the farthest closing the week out down more than 4%. Investors fled to more defensive plays.
Treasuries:
-Treasury yields were all up this week. Yields tumbled on Thursday with the release of cooler-than-expected GDP growth. However, this optimism of a cooling economy was quickly and aggressively overturned on Friday with the release of a hotter-than-expected PCE report. Simply, inflation concerns came back so yields went up.
Commodities:
Oil
- Not significant movement in oil markets this week as they closed out flat. There was some intra-week volatility with oil prices tumbling mid week but recovering quite nicely.
Gold
- Gold tumbled on the week giving up the gains it made last week. Gold, however, is still sitting above 1800$ an ounce.
BTC -23,177, -5.76% ETH - 1,607.31, -5.19%
- Bitcoin has rallied tremendously since the start of the year to $25,000 a coin. This week, however, Bitcoin had its worst week since November falling to about $23,000. The recent fall can be attributed to broader market sentiment which has recently shifted due to concerns of inflation.
Europe:
Stoxx 600- 457.70, -1.42% DAX -15,209, -1.76% FTSE 100 -7,878, -1.57%
Chart of the DAX (5-day)
- Silvana Tenreyro, intrest rate setter of the Bank of England, recently said that their current high interest rates pose possible risks to the economy. The Bank of England were quick to increase interest rates in light of high inflation due to the energy crisis, and although it has brought inflation down, it may pose exposure to a possible recession.
Asia:
XJO (Australia)-7,307, -0.54% Shanghai 180 Index-8,569, 0.99% Nikkei 225- 27,453, -0.88%
XJO 5-day Chart
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