By: Jeff Anderson, CFA
|Close||Weekly return||YTD return|
|US Treasury 10yr Yield||2.745%||-10.9%||123.1%|
Source: Wall St. Journal
Market Wrap – “Stocks Notch Their Best Week Since November 2020” (1)
As we approach the May long weekend and the unofficial kick-off of summer, the markets decided a little reprieve from the constant declines was in order. US indices were up over 6% on average for the week. The volatility in the bond market finally settled down a little, leaving the US 10-year Treasury Note solidly below 3%. Heck, even mortgage rates declined for two straight weeks.
Last week’s “retail Armageddon” was followed by good news coming out of retailers who reported this week. Per Bloomberg.com (2), consumers are dipping into their savings to keep spending. It’s hard to know if that’s good or bad. It’s good in the sense that it may signal confidence in in the strong labor market and ability to keep their jobs, and possibly even get a raise. On the other hand, it could be bad because inflation has pushed prices to levels where people need to dip into savings to pay bills and purchase goods. That’s economics. It is not a hard science.
There are often counter arguments to almost anything. So, what does this all mean? Inflation, interest rates, consumer sentiment, retail sales, bond yields, energy prices, the price of avocados or a new car. You likely know the answer to this. When there is too much money chasing too few goods, prices rise (that’s inflation in a nutshell). Too much money can come from money printing, or it can simply come from a lack of supply for a good or service that’s in demand. If, for example, ten people want to buy a car and there are only six cars, the price for those cars will rise. Eventually, car companies will look at this excess demand and build enough cars to meet this demand and prices will moderate. The Federal Reserve raises interest rates to slow demand and balance supply. The wrinkle is the supply chain issues that still plague many industries. Raise rates too fast and decrease demand too quickly as the supply chain corrects itself and you end up with too much supply and not enough demand. The Fed still thinks that, as covid lockdowns ease, supply will increase and meet the slowing (not declining) demand to get to that magical point where they equal each other. Again, it’s not really an exact science. It’s part art. People’s emotions are always at play. Only time will tell if the Fed gets the balance right.
- – www.bloomberg.com 5.27.22
- – https://www.bloomberg.com/news/articles/2022-05-27/firmer-us-inflation-adjusted-spending-underscores-solid-consumer?srnd=premium
Our CEO is Featured in this Month’s Morningstar Magazine:
Our CEO and founder, Dustin Tenbroeck is featured in this month’s Morningstar Magazine. For those who know Dustin, you’ve likely heard his pearls of wisdom before. For most of us who only know the “Presidio Capital” Dustin, the article provides some great insight into who he is away from the office and how he got to where is today. He also lays out his investment and retirement philosophies, which, given the current climate we’re in, is worth the read alone. Enjoy