Weekly Market Report: May 20, 2022

A hawkish FOMC and increasing speculation surrounding the recession narrative led risk markets to another rough week with the S&P 500 flirting with bear market territory, posting a seventh consecutive down week while high yield credit spreads closed in on 5%. Interestingly, international equity markets posted strong gains last week across the board. Bonds benefited from a flight to quality bid last week with yields falling 10-15bps on longer maturities while the strengthening USD took a breather, falling 1.35% on the week. Commodity markets posted modest gains with oil up 2.5% to $113 and natural gas rising another 5.5%.

Market Anecdotes

• The extreme volatility and price declines of the S&P 500 has left the market 19% below the early January high but still 78% above the March 23, 2020, low.
• Market technicals haven’t fully reached washed out levels with 10day A/D of 46% and put/call ratios holding up while percentage below 50/200dma and the lower BB of 3,848 looking more oversold. IIAS bull-bear of -15.2% is lower than any reading since the GFC.
• While market corrections are always unsettling, it’s worth remembering how frequent and deep they occur. The median non-recession correction is -12.5% and recession corrections hover around -24%.
• Earnings, dividends, and multiple expansion/contraction are the drivers of stock market returns and the latter has both giveth (2020-2021) and taketh (2022) in grand fashion in recent years.
• 95% of S&P 500 companies have reported a beat rate and margin of 77% and 4.7% respectively but the negative price reaction of 0.5% to positive EPS surprises.
• Market narratives from the Fed and U.S. Treasury Secretary left investors feeling like a policy of hope or luck to avoid recession is pretty fragile but a strong labor market, healthy consumer balance sheets, moderating inflation, and supply chain normalization offer a solid footing.
• Robust consumer balance sheets (demand) support a constructive view of forward growth expectations with $4t in checking and loose currency and $4.5t in money market holdings.
• After breaking above the key psychological level of 3% earlier this month, 10yr UST yields have settled down into the 280’s.

Weekly Market Report: May 13, 2022

Risk markets endured yet another difficult week, with the S&P 500 and NASDAQ posting a sixth consecutive down week, leaving the broad U.S. equity markets up only 15% over pre-COVID highs now that much of the valuation premiums have been right sized. While it’s too early to declare Monday’s 3.20% yield on the 10yr UST a near term high, the rise in interest rates did take a breather last week with most maturities falling 0.10% to 0.20%. Commodity markets were flat last week with oil holding onto the sharp gains of the past few months while the USD posted another strong week versus foreign currencies.

Market Anecdotes

• The bond market found some footing, at least for the time being with rates settling down in the back half of the
week. Corporate bonds are now offering a decent value relative to late last year.
• The exceptional volatility we’ve seen has left global equities trading at 15.5x (non-U.S. 12.6x and U.S. 17.6x), well into a cycle of recalibrating valuations and increasing the likelihood that fundamentals will remain a key driver of returns in the back half of 2022.
• FactSet noted 85% of companies have cited ‘inflation’ on Q1 earnings calls but this hasn’t translated to much profit margin compression which sits at 12.5% versus 12.7% on March 31st.
• Value/growth dynamics don’t stop at the U.S. border with generational outperformance of growth experiencing a meaningful reversion in conjunction with the rise in interest rates and inflation. That said, forward returns of international versus U.S. hinge on several dynamics.
• Several Fed officials echoed Powell’s assertion last week that 50bps hikes are the preferred approach. The Fed Funds future forward curve is suggesting the terminal Fed Funds rate is roughly 3.3%, well above the current FOMC forecast of neutral rate of interest.
• The Fed quantitative tightening program leaves very little likelihood of any FOMC open market sales of their U.S. treasury portfolio with a small possibility of MBS sales as things progress.
• Fundstrat highlighted how quickly markets have worked to price in the tightening of overall financial conditions, which is precisely what this Fed cycle is intending, relative to prior cycles.
• While criticism of Fed forecasting prowess is ample and easy, economists haven’t fared much better with eighth straight months of at or upside CPI surprises and just 3 of the past 24 reports surprising to the downside.
• ECB President Christine Lagarde leaned into potential rate hikes as early as the third quarter, pulling market expectations forward given the current inflationary backdrop in Europe.
• The Fed’s Senior Loan Officer Outlook Survey showed very robust demand for business loans, easy lending standards, and plummeting demand for mortgages.
• The latest SCOTUS controversy overturning Roe v Wade adds to a list of issues that may impact midterms including inflation, moderating growth, and fiscal policy. The most likely outcome remains congressional gridlock which can be viewed as marginally positive given the backdrop.
• POTUS surprised markets at the margin in a presser where he noted consideration of reducing tariffs on China.
• What’s going on with the USD? Looking at global currency reserves, BCA Research made note that of the 26% of outstanding treasuries held by foreigners, they estimate ‘allies’ hold approximately 36% and ‘non-allies’ approximately 23%.

April Market Review

April was the cruelest month of the year thus far with all major global financial assets performing poorly with the exception of the U.S. dollar. Monetary policy, inflation, supply chain disruptions, Chinese zero tolerance Covid policy, and the war in Ukraine combined to push rates and commodities sharply higher and global equities lower. After posting one of the only positive numbers in March, U.S. equity markets lost 8.7% in April, one of the worst returning equity markets globally with technology stocks leading the way down as evidenced by the NASDAQ marking its worst monthly decline since the global financial crisis in 2008. Chinese equity markets (-4.1%) saw a late month rally with expectations of easing both monetary policy and technology regulation while Europe was a top relative performer losing only 0.75% in local currency terms but -5.75% after adjusting for the strong U.S. dollar. Fixed income markets posted a fifth consecutive month of losses with both U.S. bonds (-3.75%) and non-U.S. bonds (-6.99%) losing substantial ground. Interest rates crept higher on monetary policy (Fed among others) and inflation concerns with inflation data sticking at multi-decade highs. High yield credit spreads moved methodically higher through the month, from 3.43% to 3.97% but remain relatively low in a longer-term context. Commodity markets enjoyed another strong month of gains mostly through the energy and agricultural complexes while industrial and precious metals both lost ground in April. The Russia-Ukraine war has sent energy and agricultural prices soaring this year with oil (+44%) and natural gas (+103%) as well as corn, wheat, soybeans up 27%-38%. The labor market, economic activity, and corporate earnings all look relatively encouraging with elevated inflation and its uncertain path forward posing questions to any bullish thesis. Unemployment of 3.6%, service and manufacturing surveys solidly in expansionary territory, and U.S. earnings growth of approximately 9% all suggest relatively healthy underlying fundamentals.

Market Anecdotes

• FactSet noted that, through April, 55% of S&P 500 companies have reported earnings with beats and margins of 80% and 3.4% respectively. Blended earnings growth is at 7.1%. Revenue beats and margins of 72% and 2.2% alongside revenue growth of 12.2% remain relatively encouraging.
• The yield on the 10-year Treasury note posted its biggest monthly gain in 13 years. Global bonds have lost 11.30% in the first four months of the year and 5.48% just in April resulting in the worst monthly and YTD return in history. Bloomberg’s U.S. Aggregate Index posted worse monthly returns on only two occasions, October 1979 and February 1980 during the last bout of runaway inflation in the U.S.
• Stocks are also off to their worst start on record. The S&P 500 is down 12.9% so far this year, marking the index’s worst YTD return in almost 95 years of history.
• The Nasdaq dropped 13.2% just in the month of April; its worst showing since October 2008. The index is down 21% in 2022; its worst start to a year on record. The FANMAG complex lost over $1 trillion in market cap just in April.
• Commodities continued to power higher in April. The Bloomberg Commodities Index returned 30.75% in the first four months of the year, far outpacing the returns at a similar point of any other year on record.
• For the month, WTI rallied 4.4% and finished the month at $104.7 per barrel. Factors include lack of Russian supply to the West, Saudis holding back supply, and US ramp up. April’s rally marks a five-month streak of higher prices which is second on record only to the eight-month rally of late 2010/early 2011.
• The French election victory of Emmanuel Macron over Marine Le Pen gave markets a dose of familiarity and certainty with respect to France’s role within the EU and globally.
• Fed comments have firmed up market expectations of the pace and scale of rate hikes with 325bps currently priced in over the next twelve months. In response, the Bloomberg Aggregate bond index (YTD) has experienced its worst return in history.
• April data releases from China reveal a mixed bag of moderate growth countered by CoVid-19 related drag on economic activity at a time with depressed private sector demand and weak housing market. Shipping congestion in Chinese ports is also clearly on the rise.
• A weak Yen in 2022 hasn’t translated to strong performance by Japanese exporters as evidenced by Japan’s equity market being down double-digits. Several forces factoring in with a rebound/reversion opportunity seemingly still in wait.

Weekly Market Report: May 6, 2022

Market impactful events last week included monetary policy announcements by the Fed and several other central banks, ample inflation speculation, and continued Russia-Ukraine fallout (NATO enlargement, Russian-EU economic warfare). Altogether, the week translated to significant volatility across equity, interest rates, and commodity markets with notable moves higher in interest rates (+0.25%) and oil (+4.9%) but a relatively muted move in U.S. equities (-0.55%) contrasted with softer non-U.S. equity markets (-1.75%). The yield curve steepened significantly reflecting a marginally dovish FOMC and commensurately higher projected forward economic growth but growing anxiety over Russia-Ukraine conflict ramped the uncertainty factor.

Market Anecdotes

• Quite a bizarre week in the equity market with neck breaking up and down moves netting to a pretty flat S&P 500 by the end of the week. Keeping investor emotions in check in times like these is easier said than done but strongly advisable.
• The 10yr UST bond traded above the psychological 3% level for the first time since a couple of brief windows in 2018, clearly exerting pressure on equity market multiples and translating to some record downside across fixed income markets.
• A big yield curve steepener on both 3m/10y 204 to 227) and 2y/10y (19 to 40) reflects a sharp upgrade to the growth outlook and higher inflation expectations accordingly.
• High yield spreads have started to expand with the OAS breaching 4% last week but remain relatively modest when viewed over a longer-term context.
• Real yields, as measured by the 10yr TIPS yield, moved sharply higher over the past week including a two day move of +30bps, taking the 38 day average up by nearly 125bps.
• Bianco Research made note that positive correlations between stock and bond prices translated to the second worst year (-9.6% thus far) on record for a 60/40 portfolio since 1988.
• Last week’s FOMC meeting produced the expected 50bps rate hike and the unveiling of a relatively rapid balance sheet unwind (QT). Powell also set expectations for two additional 50bps hikes in the next two meetings, after which they expect to see some moderation in inflation.
• Other central bank policy moves last week saw the Reserve Bank of Australia hike by 25bps, Reserve Bank of India hike 40bps, and the BoE hike by 25bps.
• U.S. earnings growth of 9.1% and sales growth of 13.3% alongside European growth of 11% and 9% respectively are outpacing consensus estimates, especially so in Europe.
• Financial system liquidity is a key barometer. Bespoke made note of a U.S. Treasury April-June borrowing report with a forecast of paying down net $26b versus prior a forecast of a net $66b borrow – the first time in six years the Treasury
announced an expected drop in debt stock.
• The ten-minute OPEC meeting last week resulted in a modest 432,000 bpd increase in oil production. Russian sanctions, a planned EU embargo on Russian oil, falling Chinese demand, and Russian threats of cutting off natural gas supplies to Europe are roiling energy markets.
• Black Knight’s March Mortgage Monitor report saw the delinquency rate drop to a new record low 2.4%, well below the prior 3.22% low mark set in January of 2020.

Weekly Market Report: April 29, 2022

Risk markets last week sensed potential escalation paths in Ukraine alongside a persistently hawkish tone from the Fed and some mixed earnings reports, resulting in a sharp turn lower in equity markets, no significant moves in interest rates, and a safe-haven surge in the USD. The S&P 500 endured a fourth consecutive down week, ending down nearly 9% in April but developed and emerging market international stocks held up a bit better. Commodities and interest rates didn’t move much on the week with next week’s FOMC meeting on deck while the USD surged to nearly a twenty-year high.

Market Anecdotes

• Equity markets limped to end the week (-3.3%) and month (-8.7%) including a sharp move lower to end trading on Friday afternoon. Bespoke noted some observations regarding VIX (not peaking), semis (downtrend with support), breadth (improving), and the value/growth cycle.

• The rout in technology stocks continued last week, bringing the NASDAQ to a 13% loss in April, now down 21% YTD, its worst four month start to a year since the GFC.

• A weak GDP number countered by continued inflationary pressures seems unlikely to take the Fed off its path from ‘easy/emergency’ to ‘neutral’ policy but a pivot to ‘tight’ still seems off on the horizon.

• The Fed is widely expected to increase the Fed Funds rate by 50bps this week and announce details of their balance sheet reduction plan.

• The USD rallied 0.5% on five consecutive days through Thursday, tying 1978 and 1985 for the longest streak of that magnitude of a gain. It is now up 8% YTD and at levels not seen since 2003.

• Anxiety provoking rhetoric and conflict surrounding the Russian invasion of Ukraine including Russian accusations of a NATO proxy war and potential European energy embargos on Russian oil have fueled equity market volatility.

• FactSet noted that 55% of S&P 500 companies have reported earnings with beat rates and margins of 80% and 3.4% respectively. Blended earnings growth is at 7.1%. Revenue beat rates and margins of 72% and 2.2% alongside revenue growth of 12.2% remain relatively encouraging.

• The U.S. Senate confirmed Lael Brainard as Vice Chair of the Federal Reserve last week, 52-43.

• French President Macron defeated Marine Le Pen garnering 59% of the vote last week in what was half of his margin of victory in the prior contest back in 2017.

• An array of conditions has fed into an aggressive selloff in the RMB recently including deteriorating economic conditions, a narrowing trade surplus, and easing monetary policy.

• Blaine Rollins wrote that the semiconductor shortage has reached a level where an industrial company is buying washing machines to strip out the semiconductors to use in their modules.

Weekly Market Report: April 22, 2022

Market drivers last week included a more hawkish tone coming from central bankers, the first big slate of Q1 corporate earnings reports, and continued concerns surrounding inflation and supply chain issues due to CoVid protocols in China and the war in Ukraine. Global equity markets fell over 2% taking the S&P 500 back into double digit loss territory on the year. Interest rates pushed higher, particularly on the short end, on inflation data and hawkish central bank comments while commodity markets traded down on a 4.5% drop in oil prices.

Market Anecdotes

• Comments from the Fed and the ECB both leaned into more of a hawkish tone last week with Powell signaling comfort with 50bps in May and Joachim Nagel noting the possibility that QE may be concluded in the current quarter.

• The US 10-year inflation break-even climbed to over 3% on Friday, the highest level in at least two decades.

• Fed comments have firmed up market expectations of the pace and scale of rate hikes over the past two weeks with 325bps currently priced in over the next twelve months. In response, the Bloomberg Aggregate bond index (YTD) has experienced its worst return in history.

• Q1 earnings season thus far has S&P 500 blended earnings growth at 6.6% and beat rates and margins of 79% and 8.1%. Revenue growth of 11.1% would mark the fifth straight 10%+ quarter.

• Technology and shadow technology stocks (FAANGs) are clearly facing some headwinds with the easing of Covid restrictions and rising interest rates. Facebook and Netflix have fallen the hardest, but Google and Amazon are meaningfully underperforming as well.

• The French election victory of Emmanuel Macron over Marine Le Pen gave markets a dose of familiarity and certainty with respect to France’s role within the EU and globally.

• Data releases from China last week reveal a mixed bag of moderate growth countered by CoVid-19 related drag on economic activity at a time with depressed private sector demand and weak housing market. Shipping congestion in Chinese ports is also clearly on the rise.

• The complexion of the REIT industry has changed notably over the past ten years with cell towers, data centers, industrial, and self-storage gaining at the expense of retail, office, hotels, and health care.

• A weak Yen in 2022 hasn’t translated to strong performance by Japanese exporters as evidenced by Japan’s equity market being down approximately 14%. Several forces factoring in with a rebound/reversion opportunity seemingly still in wait.

• Gold is finding itself in an interesting tug of war between inflation and global uncertainty on one end and a strong dollar and rising real rates on the other.

Weekly Market Report: April 15, 2022

The holiday-shortened week ushered in the beginning of first quarter earnings season alongside a relatively full economic calendar. Uncertainty surrounding monetary policy and the war in Eastern Europe continued as the primary undercurrents in the market. Global equity markets were mixed, but generally down for the week, while rising bond yields added to an already poor year-to-date outcome for fixed income investors. Oil and broad commodity markets enjoyed another strong bid last week pushing most commodities handily into double-digit returns for the year while the USD benefitted from the risk-off tone, notching a 0.50% gain for the week.

Market Anecdotes

• Prevailing uncertainties have translated to some notable equity market churn with the S&P 500 crossing below the 200 DMA six times and back above five times.
• After bouncing over 16% in the last two weeks of March, the NASDAQ has pulled back over 8% in what has been the
worst first half of April since the tech bubble crash in early 2000.
• Defensive sectors of utilities and consumer staples are now at all time high valuations, currently in the 99th percentile over the last 10 years.
• Sitting here on the doorstep of Q1 earnings season, it’s worth noting the Golub Capital Altman Index (private middle
market companies) experienced YoY earnings growth of 9% and revenue growth of 18% during the first two months of
2022.
• As the bond market suffers through one of its worst periods ever, we must ask if we are transitioning from TINA (there is no alternative) to BABY (bonds are better yielders)?
• A BofA fund manager survey shows 43% of fund managers believe inflation is transitory and 49% feel it is ‘permanent’. They also reported an average expectation of seven impending interest rate hikes.
• Fedspeak has been fairly consistent with one of the more hawkish FOMC members, Waller, noting last week that we are nearing peak-inflation readings. Markets still expect approximately +130bps over the next three meetings and twelve to thirteen over the full cycle.
• A poll by The Harrris reveals some of the real-world impacts higher inflation has on consumer spending patterns with
dining/impulse buys as the first cuts and travel/cocktails less elastic.
• Kastle published an interesting chart looking at return-to-normal activities including travel, dining, movies, but clearly not the office – casting further clouds on the office sector.
• Calls that the sky is falling due to mortgage rates hitting 5% last week were in abundance but a look at historical
mortgage rates from Bespoke provides some well-placed perspective.
• The sky is falling mentality clearly extended to AAII sentiment survey figures last week with bullish sentiment of 15.8% reaching its lowest level since 1992
• Defense spending by NATO countries shows the U.S. accounting for 69% of the total defense spend with material
spending increases across the NATO bloc. This is somewhat intuitive when adjusted for the distribution of the global
wealth, which is concentrated in the U.S.

Weekly Market Report: April 8, 2022

Inflation, monetary policy, and the Russia-Ukraine war continued to drive headlines last week pressing, interest rates sharply higher and U.S. equity markets lower, breaking a streak of three consecutive positive weeks in the stock market. FOMC meeting minutes and related comments from Fed policy makers sent bond yields up to levels not seen since March 2019, pressuring higher valuation segments of the equity market (technology, consumer discretionary) while defensive areas (healthcare, utilities, staples) posted nice gains. Commodity markets were mixed with energy markets trading sideways but grains rallying on continued turbulence in Ukraine.

Market Anecdotes

  Fed minutes from the March meeting released last week illustrated a clear FOMC appetite for a faster pace of rate hikes, pressuring rates, and risk assets accordingly. Minutes also conveyed a faster pace of QT with a three-month ramp leading to a pace of $95b per month of roll-off.
• Comments from Brainard and Bullard effectively “strangled the dove” pushing long-term bond yields higher and un-inverting the yield curve accordingly. Aside from rate policy, balance sheet policy is being priced into markets with impact estimates as high as 350bps in 2022.
• CME futures is pricing in an 81% probability of a 50bps hike on the upcoming May 4th meeting and 53.5% of another 50bps on the June 15th meeting. Overall, markets are pricing approximately 266bps of Fed hikes over the next twelve months.
• The UN index of global food costs rose 13% in March to set a new record high, raising concerns surrounding both humanitarian and social/political implications.
• Bianco Research noted this is the first time the S&P 500 carried a negative 3mo return into a rate hike cycle and the fastest 2y/10y inversion post initial hike as well. Clearly, the unique nature of war and a global pandemic (supply chains) factor largely into these observations.
• U.S. Treasury par real yield curve rates (5yr, 10yr, 30yr) have increased from (-1.58, -0.97. -0.36) to (-0.58, -0.22, 0.15) reflecting tighter Fed policy and increasing TIPS break evens.
• A U.S. Treasury exemption allowing Russian debt payments through American banks through May 25th was also pulled back due to the reported violence in Ukraine.
• Early in the week Russian atrocities in Ukraine surfaced renewed calls for EU-imposed restrictions on oil imports from Russia and more aggressive exploration of weaning the EU off Russian natural gas.
• Economic fallout and social tensions from China’s COVID lockdowns are increasing with speculation on policy responses gaining attention commensurately.
• FactSet made the interesting observation that Wall Street analysts have more ‘Buy’ ratings on stocks, as a percentage of overall ratings, than any time since 2010.

March Market Review

While the bounce in the back half of March felt like a recovery, the upside move was limited to U.S. equities and commodities while fixed income markets posted a fourth consecutive month of losses and international markets struggled through a backdrop of the war in Ukraine. Volatility across equity and interest rate markets remained elevated with the war and the removal of monetary policy accommodation the key drivers.

U.S. equities (+3.48%) led the way in March with global ex-U.S. (+1.16) markets posting more modest returns driven by commodity oriented geographies of Brazil, Norway, Denmark, Australia, and Canada. COVID-19 lockdowns across China took mainland Chinese stocks down 8% and overall emerging markets down 2.3% while economic risks stemming from the war in Ukraine pressured European equities to a 1.7% decline. The same war that pressured European equities resulted in Russian equities being excluded from all standard indexes, effectively disappearing from the global equity market landscape. Large cap stocks outperformed small caps and from a style/sector standpoint, value outperformed growth led by energy, materials, and utilities.

Commodity markets benefited from supply disruption stemming from the Russia-Ukraine war and a safe haven/inflation bid for gold. WTI oil (+4.76%) closed above $100 while natural gas surged 28%. Commodity gains were broad based during the month with grains, industrial metals, and precious metals participating in the rally.

From an economics and earnings perspective, the landscape looks relatively encouraging with the glaring exception of the prevailing global inflationary conditions. The labor market is very tight with unemployment nearly back to pre-pandemic record low levels. Both the services and manufacturing sectors are solidly in expansionary territory with robust levels of activity while restrictive Covid health policy measures have largely disappeared with China’s zero tolerance policy the only material global outlier. As we move into the first quarter earnings season, the S&P 500 is estimated to post 4.5% profit growth with a good possibility of hitting a fifth consecutive quarter of over 10% once earnings beat rates and margins begin to take shape.

Market Anecdotes

• In what Bespoke coined the ‘immaculate correction’ we’ve seen earnings estimates rising with stock prices (and multiples) falling, reflecting a relatively constructive forward runway translating to P/E multiple compression given the
Fed tightening cycle and prevailing geopolitical risks.
• Across twelve separate Fed speaking engagements, officials made clear the need for rates to reach neutral and move
into restrictive territory, while maintaining flexibility along the way.
• A key decision point for the economy and stock market will be what level is the true ‘neutral rate’ of interest. Is it the
FOMC’s terminal rate of 2.4% or is it closer to 3-4%? Stock markets would appreciate the Fed halting hikes below the
neutral rate in the short term, policy would eventually have to counteract remaining too stimulative in the long-term
• Strategas increased the percentage likelihood of recession to 35% due to the economic impacts of Fed tightening, higher rates, inflation, supply chain disruptions, and commodity price shocks. Meanwhile, yield curve slopes and economic data continue to paint a constructive picture.
• European policy makers will attempt to offset the impact of the Ukraine crisis through looser fiscal spending and U.S.
lawmakers have reopened the door to negotiations on the reconciliation package in a slimmed down version of the
initial $3.5t proposal but several roadblocks remain.
• The BCA geopolitical team is assigning a high likelihood that China will help Russia manage U.S. sanctions leading to U.S. sanctions on China later this year.
• Sector leadership across the U.S. markets so far in 2022 is basically energy then everything else, a mirror image and
clear departure from the technology led market over the past three years.
• U.S. equity markets falling and rising over 10% in a quarter is both very rare and perhaps (historically?) a positive setup to the coming months.

Weekly Market Report: April 4, 2022

Last week put a wrap on the month of March and the first quarter of 2022 with oil markets, inflation, and the yield curve driving the narrative. The first three months of the year delivered quite the rollercoaster ride with double digit equity market swings in both directions while March was a solidly positive month for stocks, commodities, and the USD. The same cannot be said for bond markets which ended the month with a bear flattener, an inverted 2y-10 yr slope, and higher rates in five of the last seven quarters.

Market Anecdotes

• U.S. equity markets were flat for the week but delivered strong returns in March with value (+3.5%) outperforming
growth (+2.4%) and large caps outperforming smaller caps. Energy and utilities were the standout performers while
financials and telecom lagged.
• Sector leadership across the U.S. markets so far in 2022 is basically energy then everything else, a mirror image and
clear departure from the technology led market over the past three years.
• U.S. equity markets falling and rising over 10% in a quarter is both very rare and perhaps (historically?) a positive setup to the coming months.
• While the stock market bounced sharply higher over the last two weeks of March, the bond market did not. Bianco
Research noted March was the eighth consecutive month of losses for The Global Aggregate Index.
• The 2yr/10yr slope inverted last week, triggering much hand wringing and recession talk. The reliability of the indicator and equity market performance following inversions are mixed at best.
• Statista published an alarming snapshot of crypto heists dating back to 2014 estimating over $3.1b in theft cumulatively over the past eight years.
• The Administration announced a plan to release strategic petroleum reserves of 1mbpd for a period of six months while reinvesting proceeds in the out years, effectively taking advantage of record high backwardation currently seen in the market.
• The Administration also announced plans to introduce a speculation tax on companies that have federal land drilling
leases but are not producing out of those acres.
• The Administration announced plans, under the Defense Production Act, to support production and processing of key battery inputs (lithium, nickel, cobalt, graphite, and manganese).