Last Week’s Markets in Review: Assessing the Current State of the U.S. Economy
Global equity markets finished slightly higher for the week. In the U.S., the S&P 500 Index closed the week at a level of 4,546, representing a gain of 0.08%, while the Russell Midcap Index moved 0.01% higher last week. Meanwhile, the Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, returned 0.68% over the week. International equity performance was higher as developed, and emerging markets returned 0.80% and 1.90%, respectively. Finally, the 10-year U.S. Treasury yield moved higher, closing the week at 2.38%.
The past week saw a mountain of economic data reported throughout the week and two significant events occur. First, we will review the economic data and then discuss the two significant events for the week.
With respect to the economic data releases:
• On Tuesday, The Conference Board, a business research group, reported that the Consumer Confidence Index rose to a value of 107.2 in March up from the February value of 105.7. The Consumer Confidence Index measures the consumers’ assessment of current conditions. The Expectations Index, which measures the consumers’ six-month outlook, fell to 76.6 from 80.8 in February. With 70 percent of GDP tied to the consumer, monitoring this type of data is highly important. We can conclude from these readings that the consumer feels more confident in the near term compared to the longer term.
• The final estimate of fourth-quarter gross domestic product (GDP) was released on Wednesday. The U.S. economy expanded at an annual rate of 6.9% for the quarter, which represented a slight revision to the prior estimate of 7.0%.
• The Federal Reserve’s favorite inflation measure, the personal consumption expenditures price index (PCE) for February was reported on Thursday. This index increased 5.4% from the same period last year. This represented the largest increase in this index since 1983.
• Lastly, Friday saw the Bureau of Labor Statistics release the March employment report. Overall, market participants believed the results represent a continued strong jobs market in the U.S. The unemployment rate fell to 3.6% while the labor force participation rate also performed well, rising to 62.4%.
In addition to all this economic data, we believe that two significant economic events took place last week:
• The Biden Administration announced that they plan to release an unprecedented amount of oil from the Nation’s strategic reserve to help reduce gas prices while also putting pressure on oil companies to increase supply.
• On Thursday, the 2-year and 10-year Treasury yields inverted for the first time since 2019. A prolonged period of inversion is often viewed as an early signal of a coming recession. It is important to note, however, that with the current volatility in the market, the shape of the Treasury yield curve is fluid. We will continue to monitor and report on Treasury yields for the benefit of our clients.
Investors should consider all of the information and data discussed within this market update and many other factors. However, with so much data and so little time to digest it all, we encourage investors to work with experienced financial professionals to help process all of this information in order to build and manage the asset allocations within their portfolios consistent with their objectives, timeframe, and tolerance for risk.
Best wishes for the week ahead and we hope everyone enjoys the College Basketball National Championship game!
The consumer confidence index is sourced from The Conference Board. PCE is sourced from the Bureau of Economic Analysis. Employment data is sourced from the U.S. Department of Labor. Equity Market and Fixed Income returns are from JP Morgan as of 4/1/22. Rates and Economic Calendar Data from Bloomberg as of 4/1/22. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index, U.S. Large Cap defined by the S&P 500. Sector performance is measured using the GICS methodology.
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion and Walsh cannot guarantee the accuracy of said information and cannot be held liable. You cannot invest directly in an index. Diversification can help mitigate the risk and volatility in your portfolio but does not ensure a profit or guarantee against a loss.
MSCI- EAFE: The Morgan Stanley Capital International Europe, Australasia and Far East Index, a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States and Canada.
MSCI-Emerging Markets: The Morgan Stanley Capital International Emerging Market Index, is a free float-adjusted market capitalization index that is designed to measure the performance of global emerging markets of about 25 emerging economies.
Russell 3000: The Russell 3000 measures the performance of the 3000 largest US companies based on total market capitalization and represents about 98% of the investible US Equity market.
ML BOFA US Corp Mstr [Merill Lynch US Corporate Master]: The Merrill Lynch Corporate Master Market Index is a statistical composite tracking the performance of the entire US corporate bond market over time.
ML Muni Master [Merill Lynch US Corporate Master]: The Merrill Lynch Municipal Bond Master Index is a broad measure of the municipal fixed income market.
Investors cannot directly purchase any index.
LIBOR, London Interbank Offered Rate, is the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London.
The Dow Jones Industrial Average is an unweighted index of 30 “blue-chip” industrial U.S. stocks.
The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
DJ Equity REIT Index represents all publicly traded real estate investment trusts in the Dow Jones U.S. stock universe classified as Equity REITs according to the S&P Dow Jones Indices REIT Industry Classification Hierarchy. These companies are REITs that primarily own and operate income-producing real estate.