It’s astonishing how rapidly we have transitioned from narrative to narrative in ’22 – not out of manipulation, but out of necessity – there has truly been a lot weighing on society this year. From the continued overall health, and economic, implications of Covid19. To military conflict, and economic sanctions, abroad. And now, in Buffalo New York, a racially motivated mass-shooting.
And yet, we persist – because we must.
I hear folks who are concerned about the economy ‘going to zero’. Wondering if gold, or other precious metals, will ensure their safety. Even if this is the case – even if the dollar is dropped as the reserve currency for the global economy, our national and corporate debt become too much – we (society) will persist. Because we must. Because we are Americans.
I am surely an optimist. However, I always attempt to see things as they are, not simply how I prefer them to be. And I must say, we are spoiled with comforts and opportunities in this country. Our fortitude as a nation is truly inspiring and I hope you take the time to address life this week, and every week, with compassion and love for those on hard times, but a strong sense of perseverance for us all.
Lastly, I want to send my deepest condolences to the loved ones of those who were taken from us by a radicalized terrorist in Buffalo. I will leave you with this quote, and your Weekly Market & Economic Update below.
“Racism in America is like dust in the air. It seems invisible – even if you’re choking on it – until you let the sun in. As long as we keep shining that light, we have a chance of cleaning it wherever it lands.” -Kareem Abdul Jabbar
Interested in learning more? Schedule a call with me HERE.
Warmly,
Mark Sauer
info@AllOneWealth.com
+1(310)355-8286
Weekly Market Update
- Global Equities: Heavy selling pressure pushed the S&P 500 to a new 52-week low, within striking distance of a bear market (defined as 20% decline from the peak). A Friday rally helped to stop the bleeding, but the S&P still finished the week with a -2.4% loss. The Nasdaq Composite suffered even worse losses, down -2.8%. The Dow Jones Industrial Average also finished down for the week, at -2.1%. Developed International stocks outperformed their domestic counterparts with a -0.4% dip, while Emerging Market stocks were also relative outperformers with a weekly loss of -1.1%.
- Fixed Income: 10-Year Treasury yields pulled back from above 3%, as safe-haven buying offset selling from rate hike concerns. Corporate High Yield bonds sold off alongside equities with a weekly loss of -1.0% and have now lost more than –10% year-to-date. Investment Grade Corporate Bond mutual funds and ETFs saw over $8 billion in outflows while High Yield Bond funds and ETFs had slight inflows of $170 million during the weekly period ended May 11th.
- Commodities: Oil prices bounced around during the week but ended back where they started at around $110 per barrel. Gas prices in the US surged to a new record high of $4.41 per gallon, as falling capacity at refineries has exacerbated already stressed fuel supply chains. Gold prices have been pressured by a strong dollar, falling to a 13-week low on Friday as equity markets staged their rebound.
Weekly Economic Update
- Fed Messaging Spooked Markets: The Federal Reserve Open Market Committee (FOMC) seemed to discount the possibility of a 75-basis point rate hike in its May policy meeting, with Chairman Powell stating it has not been actively considered. Cleveland Fed President Loretta Mester walked back that stance a bit on Tuesday, stating that the Fed wouldn’t “rule out a 75-basis point hike forever.” With a 75-basis point hike back on the table for June, markets have begun pricing in a roughly 14% probability that the Fed exceeds the expected 50-basis point rate increase, per data from CME Group.
- Inflation Persists: Consumer Price Index data for April was slightly hotter than expected, at 8.3% vs a forecast of 8.1% year-on-year. Core CPI, ex-Food and Energy, was also higher than expected at 6.2% vs a forecast of 6.0%. Markets sold off on the data, which puts additional pressure on the Federal Reserve to raise rates aggressively while trying to avoid triggering a recession.
- Crypto Carnage: Though the web3/crypto space promise abundant utility for society in the years ahead. It’s increasing popularity is mostly due to its speculative nature – high risk, high reward – which has yielded many investors well over the years… Cracks, however, are beginning to appear in the sector, with disastrous results for many last week. For example, Terra, a “stablecoin” that was supposed to track the US dollar, decoupled from its peg prompting a related cryptocurrency known as ‘Luna’ to crash from over $80 to zero. The panic bled into the largest stablecoin, Tether, which briefly broke the buck as well. Tether has a market capitalization of over $78 billion but has been scrutinized for failing to provide evidence of adequate reserves to support this valuation.
Chart of the Week
The Chart of the Week is a 5-year weekly view of the Nasdaq Composite, shown with its 200-week moving average (blue line). With shorter-term support levels in the rear-view mirror and the Nasdaq in a bear market decline, we look to longer term technical levels such as the 200-week as an indicator of how far this selloff might go. The 200-week marked the bottom of the 2020 COVID selloff and we would expect the Nasdaq to bottom out somewhere between current levels and the 200-week moving average (currently at ~10,700).
Market Data Source: Hanlon Investment Management
