Weekly Market Report: May 10th, 2024

Markets last week didn’t have too much to absorb thanks to a very light economic calendar and the tail end of Q1 earnings reports. Equity markets continued to rebound from April’s volatility with the S&P 500 climbing 1.85%, a third consecutive week of gains. Developed international markets were also up 1.8% while the emerging markets finished flat despite another up week in China. Despite several Fed speaking engagements decorated by a wide variety of talking points, bond markets didn’t sniff out anything new. Interest rates were relatively flat across the board with the 10yr yield closing the week exactly where it began at 4.5%. Both the USD and commodity complex notched minor gains on the week with the Yen and Real losing ground versus the USD and commodity gains modest but widespread.

Market Anecdotes

  • The market consolidation period from the S&P 500 record high set on March 28th through late April has been followed by a healthy rebound.
  • FactSet noted Q1 blended S&P 500 earnings growth is at 5.4%, overwhelmingly bolstered by the ‘Mag Seven’ bottom line as evidenced by the fact that removing the top 5 contributors (Microsoft, Nvidia, Meta, Amazon, Alphabet) blended earnings would be -2.4%.
  • Eleven Fed speaking engagements last week gave investors a fresh dose of the higher for longer narrative as it pertains to the Fed funds rate and the FOMC objective of reducing inflation back toward its 2% target.
  • Fed funds futures are reflecting a consensus of September marking the formal Fed pivot with the likelihood of at least one cut currently priced at 61%. If a cut is delivered in September, it will most certainly be greeted with political handwringing given its proximity to the general election.
  • The Fed’s Survey of Loan Officers published last week showed weaker loan demand across the board and continued tightening standards for CRE and C&I loans with particular scrutiny on credit cards.
  • The National Association of Realtors noted the combination of high prices and high mortgage rates have taken U.S. home affordability to the lowest on record.
  • A Bloomberg article updated what may be one of the most important charts for investors to keep top of mind contrasting the short- and longer-term horizon returns of core asset classes (stocks, bonds, cash) with a clear positive skew growing in lockstep with time horizon.
  • With the risk-on cyclical tailwind of 2023 behind us, the lagging healthcare sector as a counter-cyclical with a new contract cycle (pricing power) tailwind over the coming year is taking shape as a potentially interesting fundamental play.
  • Global central bank meetings last week included the BoE projecting a more dovish tone than expected and the Riksbank became the second G10 central bank to cut (25 bps to 3.75%).
  • One clear consequence of conflict in the Middle East is the re-routing of global shipping traffic. Suez Canal daily ship traffic of less than 30 is down over 50% and volumes are down over 70%. This is mirrored with a commensurate increase in traffic around the Cape of Good Hope.
  • A tongue in cheek observation by BCA noted that if the SPR were a hedge fund run by the current U.S. administration, an average oil purchase price of $83 and average selling price of $95, has ‘Biden Capital’ outperforming the WTI Oil index by approximately 7%.

Economic Release Highlights

  • The JPM Global Composite PMI (C,M,S) registered (52.4, 50.3, 52.7) respectively, solidly in expansionary territory.
  • Weekly jobless claims of 231k increased by 22k and came in above expectations (231k vs 212k), taking the 4-week average 10k higher to 215k.
  • May’s UofM Consumer Sentiment Index registered 67.4, well below consensus expectation of 77 and last month’s reading of 77.2.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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