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Financial Market Update – Week of 05/22

May 22, 2023

 Major U.S. stock markets closed higher last week, with technology leading. In fact, large-cap tech helped to power the S&P 500 to its highest weekly close since August of last year.

Tallying last week, the S&P 500 rose by 1.65%, the Nasdaq 100 increased by 3.47%, and the Dow Jones Industrial Average added 0.38%.

Calm Indexes with a Splash of Upside

Despite uncertainty over the debt ceiling, major averages have remained calm, with volatility,  as measured by the VIX, remaining subdued following the spike in March on regional bank concerns.

The recent market calmness has many folks scratching their heads, wondering why the debt ceiling and looming credit crunch risks aren’t currently impacting the financial markets.

But hey, the markets are usually ahead of the headlines. As long-term investors, we let the narratives play out and use time to our advantage. Perhaps the tightening credit markets are doing the Federal Reserve’s job for them at a high level, as mentioned by Federal Reserve Chair Jerome Powell.

Growth Outperforming Value

Growth stocks have been outperforming their dividend-paying value counterparts lately. The trend of defensiveness that dominated throughout 2022 has taken a backseat to growth and technology thus far in 2023.

Ultimately, as evidenced above, trends come and go. That’s one reason that it is wise to have a well-balanced portfolio with an array of asset classes.

April Retail Sales 

On Tuesday, the Commerce Department released April Retail Sales data, which showed a 0.4% increase. This is good news, as it’s the first rise after two months of declines. However, it’s still less than what analysts were predicting.

U.S. stock indexes seemed to like the data, albeit in a delayed fashion. The S&P 500 traded lower last Tuesday after the data release but moved higher over the following two trading sessions. It may seem like a confusing data point (given that we are experiencing credit tightening). But the market knows best!

Some news reports seemed to interpret the data as a strong consumer, while others showed more of a consumer that is struggling to keep up with inflation. Consumer debt continues to rise.

Government Bond Yields Firm

Treasury yields rose in line with equities last week, indicating investors flocked to equities and sold bonds. 

Perhaps not too surprising, as all eyes are peeled on the debt ceiling, the U.S. 10-year note yield settled last week near 3.693% at levels not seen since March.

Dallas Federal Reserve President Lorie Logan said the current economic conditions do not yet warrant a rate hike pause. Stocks didn’t seem to mind.

This Week

With this Wednesday’s meeting minutes release from the last Federal Open Market Committee (FOMC) meeting, all eyes are trained on whether commentary indicates that the Fed will pause rate hikes at the June meeting or make it eleven rate hikes in a row. 

In addition, Friday will feature the Fed’s preferred inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index. The resulting data could influence the Fed’s stance on inflation at the upcoming June 14th meeting.

A Reminder 

Sometimes, the news flow doesn’t make sense or seem to match the trading behavior of the markets. The “mood of the market” is dynamic and changes, sometimes quickly and sometimes slowly. Being long-term investors keeps us invested and disciplined.


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