|AUTHOR: Jason J. Roque, CFP®, APMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, Data, Jobs|
Rotation, rotation, rotation. Markets fell Monday led by the NASDAQ. The gainers for the day were financials, commodities, and specifically energy. The move is indicative of rising inflationary expectations.
The start of trading on Tuesday looked much like Monday as markets opened deep in the red. Technology shares led the market lower once again. The move, however, did not last. The S&P 500 erased all of its losses for the day to end the day up 0.13%. The NASDAQ was not as lucky as it still fell 0.5%. This further advanced the value vs. growth trade.
Markets on Wednesday shrugged off the recent woes and steamed to a strong close. The S&P 500 rising 1.14% out pacing the NASDAQ at 0.99%. Much of this came following Federal Reserve Chair comments affirming loose monetary policy well into the next economic expansion.
The day started bad and just kept getting worse. The S&P 500 tumbled 2.45% and the NASDAQ tumbled 3.52%. This was happening as interest rates continued to rise in anticipation of inflation later this year. This inflationary expectation is nothing new. The economy is improving quicker than expected and appears to be spooking the markets.
The S&P moved between positive and negative territory all day. Settling 0.48% lower. This was not much of a rebound statement after the tumble markets took Thursday. The reflation trade that calls for strong growth later this year is concerning in the credit markets. The burden that debt will have on corporate balance sheets as rates rise could cause concerning pressure on earnings.
Last week was a rough one for the markets. The S&P 500 lost 2.45% and the NASDAQ fell 4.92%. The losses last week reflect concerns that the economy will grow too fast. As consumption ramps up, inflation becomes more of a risk. That inflation will likely lead to a steeper yield curve causing adjustable-rate debt to increase interest obligations on corporate balance sheets. This increased debt obligation is feared to cut into corporate profits in the future. In this way too much growth can be a bad thing… Kind of…
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