Market Update September 12, 2022
Photo by Aaron Burden on Unsplash
On a holiday-shortened week, economic data for the week included the ISM services index strengthening, and mixed results for jobless claims.
Global equity markets gained last week, as central bank actions and member comments solidified a commitment to fighting inflation without overly damaging the global economy, in addition to inflation pressures themselves cooling. Bonds were mixed, with treasuries down due to higher rates, and high yield seeing gains. Commodities were mixed, with energy falling back due to natural gas prices, while crude oil was little changed.
U.S. stocks gained ground last week, in a reversal of recent negativity, led by lower energy prices and well-accepted Fed comments about the ability to achieve a soft landing. Every sector was in positive territory, led by most cyclical consumer discretionary and materials, each up over 5%. Energy lagged, up less than a percent. Real estate also gained several percent, despite higher longer-term interest rates, which have been a headwind for the group.
Foreign stocks came in a bit behind U.S. stocks, with Europe and the U.K. several percent higher, while gains in Japan and emerging markets were more tempered. More solidified plans by several European nations (such as household energy cost caps in the U.K.) in handling the energy crisis resulting from gas shortages appeared to improve sentiment. The magnitude of some fiscal aid is approaching or exceeding that of the Covid response. The ECB raised interest rates by 0.75% on Thurs., which, coupled with hawkish language, has raised expectations for further hikes later in the year. Chinese producer price inflation fell unexpectedly, which helped global sentiment later in the week.
U.S. treasury bonds fell back last week, as higher rates in Europe translated to higher U.S. rates—in a bit of a reversal of the usual pattern. Investment-grade corporates were little-changed, while high yield and floating rate bank loans were strongly positive, in keeping with equity sentiment. Foreign bonds were mixed, with higher rates hurting developed market bonds, while a weaker dollar boosted emerging markets.
Commodities were mixed last week, with agriculture and industrial metals gaining several percent, while energy prices pulled back. The price of crude oil was little changed on the week, ending at just under $87/barrel; natural gas prices corrected by nearly -10%. Extreme dynamics continue to dominate gas markets, with an undersupply in the U.S. caused by hot weather usages and an outage at a key plant accounting for a fifth of total exports, while Europe is obviously affected by the Russian pipe shutdown. Perhaps amazingly, European efforts to pre-fill inventory ahead of winter have been successful, but price pressures persist, resulting in government policy actions.
Period ending 9/9/20221 Week (%)YTD (%)DJIA2.72-10.16S&P 5003.68-13.72NASDAQ4.15-22.15Russell 20004.07-15.39MSCI-EAFE0.89-19.52MSCI-EM-0.13-19.42Bloomberg U.S. Aggregate-0.70-11.56
U.S. Treasury Yields3 Mo.2 Yr.5 Yr.10 Yr.30 Yr.12/31/20210.060.731.261.521.909/2/20222.943.403.303.203.359/9/20223.083.563.453.333.47
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.