Weekly Market Report: December 27, 2022
As it was this week, 179 years ago, that the world was introduced to Ebenezer Scrooge, it seems appropriate that the bond market took yet another beating, 2022 style. Rates moved sharply higher in a week with relatively thin trading volume and a very light economic calendar leaving the 10 yr UST nearly 0.30% higher to close the week yielding 3.75%. Equity markets saw the U.S. and emerging markets close the week relatively flat while developed non‐U.S. equity markets notched a 1% gain. Commodity markets climbed 3% driven by strength in crude oil and the USD weakened by 0.37% on the week.
Market Anecdotes
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With every year end comes an annual data dump of calendar year market history lessons beginning with Bloomberg pointing out that the S&P 500 has fallen two straight years only four times since 1928 (WWII, Great Depression, dot‐com bubble, 1970’s oil crisis).
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With core inflation ex‐shelter being highlighted by the Fed as a key focus point with monetary policy implications, the trend is clear but importantly, the terminal level remains very unclear.
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The BoJ caught markets off guard last week by increasing the upper bound of its 10yr JGB target from 0.25% to 0.5% but left their funding rate of ‐0.10% unchanged.
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The Covid situation in China has left the economy and overall public health in a state of limbo where models and anecdotal information are estimating 1mm new infections and 5,000 deaths daily. Curiously, despite the abrupt end to zero Covid policy, daily public transportation volumes have fallen precipitously since early December policy change.
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A Bloomberg note on the declining personal savings rate made clear an important distinction between personal savings rates and consumer liquidity/balance sheet strength.
Economic Release Highlights
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The December Housing Market Index came in at 31, falling short of forecasted 34 and below consensus range of 32‐35.
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November Housing Starts (1.427mm) and Permits (1.342mm) came in above and below their forecasts respectively. Existing Home Sales of 4.09mm was slightly below consensus but within the consensus range, down 7.7%MoM and down 35.4% YoY.
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Consumer Confidence reading for December came in well above the point forecast (108.3 vs 101.0) and consensus range of 98.0‐103.0.
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The third and final estimate of Q3 U.S. GDP was revised higher from 2.9% to 3.2% (A/R) with Personal Consumption revised up from 1.7% to 2.3% (A/R).
