Market Update November 28,2022

Photo by Tobias Arweiler on Unsplash

On a Thanksgiving-shortened week, economic reports included surprisingly positive data from durable goods orders and new home sales, and improvement in consumer confidence, while jobless claims rose a bit.

Global developed market equities gained last week, while emerging markets fell back, due to declines in China. Bonds fared positively, as long-term interest rates declined. Commodities fell back, mostly due to a drop in crude oil prices.

U.S. stocks gained in the lower-volume holiday-shortened week. By sector, conditions were mixed, with utilities and materials each rising by 3%, while energy brought up the rear showing a minimal increase. Real estate gained 2%, around the middle of the pack.

Sentiment was negatively affected by additional announcements from tech companies about layoffs, although it appeared to be focused only on certain elements of the sector. The growing potential of a railroad strike could negatively near term supply distribution for energy, as well as industrial and consumer durable goods, while the length of any strike being key for the amount of damage. However, these appeared to be offset by better earnings results in the technology and consumer discretionary sectors, as well as signs the Fed might be decelerating the pace of rate hikes ahead.

Developed foreign stocks gained with hopes that European central banks might also slow the pace of rate hikes, like the U.S. Fed, in addition to a weaker dollar. Interestingly, a variety of business activity indicators continued to decline and show the European economy may be close to, or already be in, recession. (This is another good time for a reminder of how market valuation and forward-looking prospects remain very different from current economic readings.) Emerging markets fell back on the week, led by a -3% decline in China, as new Covid restrictions were applied in some areas to combat rising cases, including a key technology manufacturing region. Turkey was a world exception last week, with a gain of nearly 10% (bringing year-to-date returns to over 70% in USD terms), led by local retail investors, and due to an unconventional policy of lowering interest rates to combat high inflation by focusing on raising economic growth.

U.S. bonds saw positive returns as treasury yields on the intermediate- to long-term end fell back by 10-15 bp. Short-term yields, however, rose in anticipation of Fed movements into 2023. Credit fared slightly better than governments, due to spreads tightening slightly. Foreign bonds fared slightly better due to the U.S. dollar falling back a percent last week.

Commodities fell back overall last week, despite the positive influence of the weaker dollar, led by lower prices for energy and industrial metals (aluminum). The price of crude oil fell by nearly -5% to just over $76/barrel, as uncertainty over China’s rising lockdowns, OPEC production, and European gas caps weighed on speculative activity. On the other hand, natural gas futures prices rose over 9% due to perceived weather-related demand, uncertain price cap levels, and expected export activity to Europe (which has been buying up U.S. LNG to replace supply from Russia).

Period ending 11/25/20221 Week (%)YTD (%)DJIA1.80-3.70S&P 5001.56-14.29NASDAQ0.73-27.70Russell 20001.07-15.74MSCI-EAFE2.15-13.69MSCI-EM-0.09-21.57Bloomberg U.S. Aggregate1.05-12.78

U.S. Treasury Yields3 Mo.2 Yr.5 Yr.10 Yr.30 Yr.12/31/20210.060.731.261.521.9011/18/20224.344.513.993.823.9211/25/20224.414.423.853.683.74

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.