By: Jeff Anderson, CFA
|Close||Weekly return||YTD return|
|S&P 500||4,543.06||1.79%||– 4.68%|
|Nasdaq Composite||14,169.30||1.98%||– 9.43%|
|US Treasury 10yr Yield||2.481 %||33.0%|
Source: Wall St. Journal
Last week, the Federal Reserve officially kicked off their rate-hiking cycle by increasing the Fed Funds rate 0.25%. Fed Governor Jay Powell signaled consistent rate hikes would likely come with each quarterly meeting. The 10-Year Treasury yield is nearing 2.5%. Mortgage rates are solidly above 4%, putting more pressure on potential homebuyers. Gasoline is over $6 per gallon in many parts of California. Everything’s getting more expensive. Yet, despite this, the S&P 500 is up ~3.5% since last week’s Fed meeting. That is not say that the rebound in equity markets will continue. The rebound caught many “pundits” off-guard. Could the markets be responding to a belief that the Fed will bring down inflation and keep the economy from overheating, or falling into a recession? Possibly. Does anyone really know where the market is headed over the next nine months? Absolutely not. Having a well-diversified portfolio and a long-term approach to investing can help investors tune out the noise and avoid making emotional decisions that may derail their retirement goals.
Initial Jobless Claims Fall to Lowest Level in 50 Years:
Simply put, initial jobless claims reflect just how tight labor markets are. Nancy Vanden Houten, lead economist at Oxford Economics was quoted saying, “In an environment where employers are struggling to hire and retain workers, layoffs are going to be at a minimum.” This figure is exacerbated by the fact that roughly half a million fewer people were in the labor force in February. We have 6.3 million unemployed people in the US yet there were roughly 11.3 million open positions in January. Such an imbalance will likely continue to put upward pressure on wages.
Gas Prices Increase at Fastest Pace on Record:
Americans are acutely aware of the sudden, and dramatic, increase in gas prices. In fact, the increase is the fastest on record. There is some good news. Prices, adjusted for inflation, are still well below the peak in 2008-2009. The prices vary state by state due to factors such as taxes and gasoline specifications. In addition, “gasoline inventories are below their five-year historic range in the West Coast region and above average for this time of year in the Midwest, according to the EIA.” When will prices go down, or at least stop going up? That’s anybody’s guess. Putting more rigs in the ground in the US along with other supply increases globally and an end to the Ukrainian conflict should help.