Market In a Snap! April 17th – April 21st, 2023

By: Dave Chenet, CFA, CAIA®

 CloseWeekly returnYTD return
S&P 5004,133.52-0.10%7.66%
Nasdaq Composite12,072.46-0.42%15.34%
Russell 2,0001,791.510.61%1.85%
Crude Oil77.80-5.81%-3.10%
US Treasury 10yr Yield3.57%  

Source: YCharts, Yahoo! Finance, WSJ

Market Recap

Mixed corporate earnings, political negotiations over the US debt ceiling and signs of a deteriorating US labor market contributed to a mixed week in equity markets.  Worse-than-anticipated results from Tesla and AT&T, combined with a warning about the health of the US consumer from American Express in addition to a pick-up in both initial and continuing unemployment claims brought into-picture dual headwinds of slowing economic growth and a Fed that is anticipated to raise rates an additional 0.25% in early May.  Overseas, European markets continued to push higher, and China’s GDP estimates beat forecasts and showed continued economic acceleration as it emerges from its “Covid zero” restrictions.

Next week will bring a slew of corporate earnings and important end-of-month reports to which the markets will pay close attention as it attempts to discern what the Fed will do at its May 3rd meeting.  Current estimates favor a rate hike, with only a 14% probability of a pause.  Looking out into the future, however, the market is pricing in two rate cuts by year-end. 

What We’re Reading:

FT: Blackstone president warns market is overestimating chance of Fed rate cuts

Reuters: When will US hit its debt ceiling and what happens if country defaults

Chart of the Week:

Forward-looking manufacturing surveys in the U.S. have deviated from those in China.  Strong GDP growth, credit expansion and lower rates are spurring optimism amongst Chinese manufacturers and very strong retail spending is supportive of continued economic expansion, while US indicators point to slower growth.

Market In a Snap! April 10th – April 14th, 2023

By: Dave Chenet, CFA, CAIA®

 CloseWeekly returnYTD return
S&P 5004,137.520.79%7.77%
Nasdaq Composite12,123.470.29%15.85%
Russell 2,0001,781.161.50%1.23%
Crude Oil82.662.14%2.98%
US Treasury 10yr Yield3.52%  

Source: YCharts, Yahoo! Finance, WSJ

Market Recap

A busy week for economic data which, on the whole, showed slowing economic growth and moderating inflation pressures pushed equity indices to modest gains.  Inflation data, highlighted by the CPI and PPI reports, came in below expectations with the forward-looking PPI report posting its largest month-over-month decline since the start of the pandemic.  Meanwhile, data on the health of the US consumer was mixed; retail sales fell 1% for the month of March while sentiment data ticked up (from still low levels).  

Also released this week were the minutes from the Federal Reserve March meeting which showed growing concern amongst central bankers that recent banking stress would lead to “a mild recession” later this year.  Troubling, however, was that the report also noted inflation remains “unacceptably high” and that the reduction in inflation was progressing with “slower-than-expected progress.”  While the Fed may be nearing the end of its rate hiking cycle, it may defy market expectations for rate cuts by year-end absent significant deterioration of the labor market, which continues to hold up reasonably well.

Investors will focus on Q1 earnings next week and will hope that strong momentum continues after a solid beat by JPMorgan.

What We’re Reading:

FT: Banking tremors leave a legacy of credit contraction

The Hill: Why the 1980s Recession Haunts the Fed

Chart of the Week:

The tech-heavy NASDAQ index and the Small-Cap Russell 2000 index have deviated in recent weeks, with the NASDAQ significantly outperforming.  Markets may be recognizing that smaller companies have a higher reliance on bank financing and the recent banking turmoil has significantly tightened credit conditions.  Alternatively, investors may be renewing hopes of another tech-driven run despite high valuations and a higher interest rate/inflationary environment.

Market In a Snap! April 3rd – April 7th, 2023

By: Dave Chenet, CFA, CAIA®

 CloseWeekly returnYTD return
S&P 5004,105-0.16%7.03%
Nasdaq Composite12,087-1.13%14.91%
Russell 2,0001,754-2.54%-0.05%
Crude Oil80.546.34%0.35%
US Treasury 10yr Yield 3.28%  

Source: YCharts, Yahoo! Finance, WSJ

Market Recap

Stock markets closed for the holiday shortened week on Thursday afternoon (the harder working bond market, however, has a shortened trading day on Friday).  Stocks finished the week lower as PMI & employment data came in weaker than expected.  Importantly, non-farm payrolls are set to be released on Friday morning, after publication of this newsletter.  Economist consensus expectations for the payroll report is to show 240,000 jobs added last month, down from 311,000 in January. Importantly, markets will also keep a close eye on the wage growth data, which is expected to come in at a 0.3% month-on-month gain.  A number below the consensus will support the narrative that the Fed will pause their interest rate hikes.  Hotter than expected wage growth would likely weigh on markets, increasing expectations of more hikes and lowering estimates of corporate profit margins.

What We’re Reading:

Reuters: China March services activity accelerates on new orders – Caixin PMI

WSJ: Stocks Haven’t Looked This Unattractive Since 2007

Liz Annn Sonders: Elevation: Largest Stocks to Market’s Rescue?

Chart of the Week:

The 2-year treasury yield minus the 3-month treasury yield has reached its lowest level in decades. This is a signal that the always forward-looking market is expecting that the Federal Reserve will not only stop raising short-term interest rates but will soon need to cut interest rates.  Falling inflation and signs of financial stress are raising expectations that policy makers will soon need to reverse course.

Market In a Snap! March 27th – March 31st, 2023

By: Dave Chenet, CFA, CAIA®

 CloseWeekly returnYTD return
S&P 5004,109.313.48%7.03%
Nasdaq Composite12,221.913.37%16.77%
Russell 2,0001,802.483.88%2.35%
Crude Oil75.676.55%-5.68%
US Treasury 10yr Yield 3.49%  

Source: YCharts, Yahoo! Finance, WSJ

Market Recap

March finished on a positive note, with the S&P 500 advancing 3.5% on the month and 6.4% above the March 10th lows.  Easing concern about the banking sector and slowing inflation gave rise to the hope that the Fed will achieve a ‘soft landing’ – bringing inflation down towards its 2% target without pushing the economy into outright recession.  Under the hood, gains in tech and communication services offset losses in financials and real estate.  Regionally, Emerging Markets outperformed developed markets and bonds finished the month higher as treasury yields fell.

On a quarterly basis, both stocks and bonds were broadly higher.  European markets were the best performer for the second consecutive quarter and have significantly outpaced US stocks over that period as easing recessionary fears, hope of peaking inflation and very low valuations, and a falling US dollar vs the Euro all supported European stocks (in US dollar terms).  

Looking ahead, we are two weeks away from the start of a pivotal earnings season.  Investors will keep a keen eye on companies’ expectations around revenue growth and the impact of higher rates on corporate profits.

What We’re Reading:

Mohammed El-Erian: What happens in the Banking Sector Won’t Stay There

Richmond Fed President Barker: The Need to Be Nimble

Federal Reserve: Senior Loan Officer Opinion Survey on Bank Lending Practices

Chart of the Week:

While the actions from the US Treasury to quell the banking turmoil of the last few weeks may have alleviated the immediate pressure on banks, the economic impact may be yet in its early stages.  Data suggests that banks are tightening lending standards, which is a leading indicator for the health of the labor market.  Should credit conditions remain tight, the likelihood of recession is materially higher.

Market In A Snap! November 7th-November 11th, 2022

By: Jeff Anderson

 CloseWeekly returnYTD return
S&P 5003,992.935.9%-16.22%
Nasdaq Composite11,323.338.10%-27.62%
Russell 2,0001,882.744.60%-16.15%
Crude Oil$88.86-4.04%17.8%
US Treasury 10yr Yield3.842%  

Source: Wall St. Journal

Market Recap

The market finally got the inflation data it so desperately wanted on Thursday.  The Consumer Price Index (“CPI”) clocked in at 7.75% annualized for October.  It was a disappointing 8.2% the previous month.  Markets participants witnessed the best day for equities since April 2020.  The Nasdaq Composite was up a whopping 7.35%.  Even the fixed income markets had a huge day, with the Bloomberg US Aggregate Bond Index gaining nearly 2%. That is a massive move in the credit markets.  As you can see from the chart above, all the major US indices are down for the year and still have a way to go.  It should be noted that we are still in a bear market and rallies (which are simply called bear-market rallies) are often more dramatic than rallies during a bull market.  One day doesn’t make a trend, but it goes to show you how sitting out of the market when you have a long-term time horizon can be costly to your returns.  We’ve cited on more than a few occasions how sitting on the sidelines for only a handful of days can have really hurt your returns.  Just think of Thursday’s crazy day.  If the long-term average annualized return for the S&P 500 is ~ 9 to 10%, missing a 6 or 7% return day can all but dash your hopes for the year.  Many of us want to time the market.  This should show you the perils of doing it wrong.  And, worse than that, if you did seem to time it right once, you may be emboldened to do it again…and again.  Eventually it will catch up to you. It is time “in” the market that matters most.  Granted, it also must include having a diversified portfolio that matches your time horizon.

We can’t forget to mention two other important news items. One, is the mid-term elections. It’s been a closer race than many thought. As of Friday, many races are still too close to call.  Odds are still in favor of the Republicans taking the House.  In the Senate, the Democrats have gained a seat and it’s coming down to the wire. If Republicans take both chambers, it will create gridlock which is normally favorable for markets. The other newsworthy note was that Ukrainian forces successfully pushed Russian troops out of Kherson, which was the only regional capital in the south of Ukraine that Moscow had seized.  The Ukrainian resolve has been impressive.  Hopefully, the conflict is closer to the end than the beginning.

Traditional Energy Companies are in the Green Energy Game:

Koch Industries, one the largest private companies in America, is getting into battery technology.  Many of us think of traditional energy companies as climate deniers or evil entities hell bent on destroying our planet in pursuit of profit.  I believe that, in the end, they are energy agnostic. They see where things are going. They want to be suppliers of energy in whatever form the market wants.  In the case of Koch’s investment in battery storage, its not for electric vehicles but rather for storing energy transmitted from wind and solar farms.  Both wind and solar can be intermittent. Having the ability to store energy in large batteries can go a long way to making renewable energy a dependable source for the US power grid. 


Advisory services are offered through Presidio Capital Management LLC, Registered Investment Advisers.  Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Presidio Capital Management, LLC unless a client service agreement is in place.

Market In A Snap! March 7th-March 11th, 2022

By: Jeff Anderson, CFA

CloseWeekly returnYTD return
S&P 5004,204.31-2.88%-11.79%
Nasdaq Composite12,843.81-3.53%  -17.90% 
Russell 2,000 1,979.67-1.06%-15.86%
US Treasury 10yr Yield1.998 %.26%

Source: Wall St. Journal

“Beware The Ides of March”

Inflation, Taxes, and Market Crashes.  Those are the three “big” things affecting retirement savings.  It’s the cornerstone of our philosophy.  This month, unfortunately, has experienced all three.  Many of us are preparing to file taxes next month.  Inflationary pressures have increased with the Russian-Ukraine conflict, and to top it off we’re amid an equity market correction brought on by geopolitical events changing monetary policy and inflation which, unfortunately, looks like it will stay higher longer.  It is times like these that can really test our faith.  Will oil prices tip us into recession?  Are we headed towards a 1970’s style stagflation?  Will things ever get back to “normal”? Are these the questions we thought of on our own or are they the rumblings of the financial news media looking to grab our attention?  Well, they have our attention.  Fortunately for us, we have history on our side.  There aren’t many (if any) decades over the past 120 years that didn’t involve volatile markets, wars, or inflation/deflation/stagflation.  

What is stagflation?  Stagflation is characterized by slow economic growth and high unemployment accompanied by risking prices (i.e., higher inflation).  We certainly aren’t in a stagflation environment now.  Unemployment is low and growth is still strong (but slowing in some areas).  Things can obviously change, and with oil prices marching higher and higher and $6 per gallon prices at the pump, the pressure on our wallets is tighter.  Airlines are increasing ticket prices to help with rising fuel prices which may temper people’s appetite for planning vacations. Food costs will likely remain elevated given the cost of transportation.  The economy moves in a cycle, and it always has, and until someone invents a better economic model for society, it will continue to do so.  But, as of today, the odds of a ‘70 style stagflation are low. Like sports betting, odds can change.

We will always have something to worry about, but putting things in context, having a plan, and most importantly being able to reduce the noise will be the best antidote.

Breaking Down Inflation:

We may be at risk of beating the dead horse of  “inflation, inflation, inflation”.  Can we stop talking about it?  Hopefully, we will be able to look at it in the rearview mirror like we have with COVID-19.  For the time being, we’ll write about it when we think there’s something noteworthy. 

The Wall Street Journal put out a good piece on where the 7.5% rise in consumer prices in 2021 came from.  Which is the rate at the end of February which clocked in at 7.9%.  Prices are likely to remain elevated for at least the first half of 2022.  If the Ukrainian conflict continues into the summer, prices may go even higher. 

See the chart below highlighting all the components of inflation.  

Market In A Snap! December 20th-December 24th, 2021

By: Jeff Anderson, CFA

This Week: Markets finished ahead during this shortened holiday week. As you know, markets are closed today for Christmas. The market digested last week’s Federal Reserve Chairman Powell’s comments and resumed their upward trajectory for the year. Bond yields remain benign keeping a lid on mortgage rates. Housing starts have slowed but, overall, residential real estate construction demand is strong. Inventory is still relatively low, pushing prices higher. With all the stock market news focused on technology companies, you might be surprised to note that the best performing companies in December have been from defensive sectors, such as Utilities, Consumer Staples, and Healthcare. Year-To-Date, the best performing sectors have been Energy (up 66.6%), Home Construction (up over 50%), Semiconductors (up ~42%) and Financials (up over 33%).

Crude Oil finished up 2.6% through Thursday, closing at $73.83 per barrel. Happy Holidays!

 CloseWeekly returnYTD return
S&P 5004,725.721.22%25.82%
Russell 2,0002,243.714.24%13.61%
US Treasury 10yr Yield1.495%  

Source: Wall St. Journal

This Issue:

  • Market Update
  • Consumer Spending Cooled off in November
  • Bloomberg: New Study Shows Omicron Has 80% Lower Risk of Hospitalization
  • Build-Back-Better Act Derailed Again

Consumer Spending Cooled off in November:

The Wall Street Journal reported personal spending rose 0.6% in November compared with 1.4% in October. Many consumers purchased holiday gifts earlier this year because of fears of shortages. Overall, the consumer is still in good shape, with unemployment around 4.2% and personal savings of over $2.5 trillion.  However, the labor participation rate is still lower than in the past (see chart) and the personal savings rate, albeit still relatively high, is back to around pre-pandemic levels. As we have written in previous updates, economists were unsure how much demand was pulled forward because of certain product shortages on top spending down of the stimulus checks in 2020 and early 2021.

Bloomberg: New Study Shows Omicron Has 80% Lower Risk of Hospitalization:

The Omicron variant spreads much faster than the previous variants. However, these infections are 80% less likely to be hospitalized if they catch it. Unfortunately, if admitted to the hospital, the risk of severe disease is like the previous two. As many of us are somewhat numb or tired of hearing about Covid-19, the risks of illness for many still exist. The US reported nearly 240,000 new cases yesterday. Dr. Fauci said earlier in the week that the peak wave for Omicron would come much faster and the risk of infections are much higher for the unvaccinated. There have been many vaccinated people contracting Omicron, but the symptoms have been much milder on balance.

Build-Back-Better Act Derailed Again:

West Virginia Democratic Senator Joe Manchin has put a wrench in the legislation, citing concerns over the spending bill’s effects on inflation and debt levels. Senator Manchin has rejected certain provisions like extended paid leave plan, and a program aimed at pushing utilities to use more clean energy. President Biden has publicly stated that a deal will get done.  The bill has already come down from $3.5 trillion to around $2 trillion. Senator Manchin has publicly stated that he would only support up to $1.5 trillion in spending.  With the Fed accelerating bond purchases and signaling rate increases in 2022, this fiscal stimulus could be even more important for the economy in 2021.

Market In A Snap! December 6th-December 10th, 2021

By: Jeff Anderson, CFA

This Week: It was a rather volatile week for many companies.  A number of high-flying technology stocks fell on hard times, sending some shares down 40% or more.  You wouldn’t know it from looking at the returns of the major indices.  The S&P 500 and Nasdaq indexes are dominated by a handful of large companies, and they have held up well.  Apple’s market value is approaching $3 Trillion, essentially drowning out the noise from the smaller companies in theses indexes. 

 CloseWeekly returnYTD return
S&P 5004,712.983.82%25.45%
Russell 2,0002,210.662.38%11.93%
US Treasury 10yr Yield1.488%  

Source: Wall St. Journal

Crude oil had a decent week, gaining nearly 9% to $72 per barrel, but well off its highs in October where it hovered around $82.  Oil traded down to nearly $10 in April 2020 when the economy was shut down due to the pandemic.  The dramatic increase in oil prices is more a function of return-to-normal price ranges. 

This Issue:

  • Market Update
  • US Jobless Claims Fell to Lowest Level in Half a Century
  • US Inflation Hits a Multi-Decade High in November

U.S. Jobless Claims Fell to Lowest Level in Half a Century

There’s a shortage of labor.  The labor participation rate is almost 2% lower than pre-Covid.  Economists have coined this period as “The Great Resignation”.  People are leaving the workforce.  Some are retiring, while others are taking time off in hopes of recharging their batteries and finding a better paying, more fulfilling career path.  We could also call this post-Covid world “The Great Mobility” as many US workers were able to move thousands of miles away from their offices where they can reduce their cost of living or seek a more balanced lifestyle.  Whatever the reasoning, it is increasingly harder for employers to find good employees, and when they do, it usually costs more.

US Inflation Hits a Multi-Decade High in November

The economic headlines have been dominated by inflation numbers for several months now.  Despite the high reading, it was to be expected.  Bond yields actually moved lower.  Why is that? It’s all about expectations.  Since the 6.8% print was not a surprise, there was nothing to spook the bond markets.

The broader indexes took this all-in stride, with the large cap indices all finishing higher on the day.  Consumers are flush with cash and willing to spend.  Unemployment is low.  Wage gains are helping.  Corporate profits, so far, are growing, meaning that they can pass along price increases.  How much of consumer purchases is pulling forward future demand as people rush to buy goods that may cost more later remains to be seen. 

Market In A Snap! August 16th-August 20th, 2021

By Jeff Anderson, CFA

The S&P 500 opened down on Monday after news of a strained exit for American armed forces from Afghanistan as well as more news of increased cases of COVID-19’s delta variant.  By Tuesday afternoon, the index was making all-time highs. By Friday’s close, it was down 0.6% for the week.

On Thursday, the Labor Department reported jobless claims of 348,000 for the week ending August 14th which is a new pandemic low but well above the approximate 200,000 level that existed prior to the pandemic.

The Fed will be holding its annual Economic Policy Symposium in Jackson Hole, Wyoming August 26th.  Fed Governor Jay Powell will deliver his remarks on the 27th and Fed watchers will be looking for any signals about tapering its asset purchases as well as the economic outlook.  Inflation will likely be a key topic.

While on the topic of inflation, Krispy Kreme announced this week that they will consider increasing prices in September in response to rising costs for key commodities like sugar and edible oils that go into making their delicious donuts.  Whether the inflation in commodities is transitory or not, it’s a good reminder that prices for food, energy, clothing etc., will continue to rise and eat away (no pun intended) at your retirement savings.  

When Krispy Kreme opened in 1937 a dozen donuts cost $0.80.  Today, that same dozen costs $8.00. (1) Over time, prices rise. Period.  Add that to the other two certainties in life.

Yet despite this example of food inflation, the debate remains whether this sudden increase in inflation (“CPI”) is transitory. The 10- and 20-year US government treasury yields are still below 1.5% and 2% respectively.  If inflation truly takes hold, the bond market will send a clear signal in rising long-term yields.

Enjoy the weekend!

Jeff Anderson, CFA

Portfolio Manager.