06|22|2022

Soft Landing?

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS: S&P 500, NASDAQ, Tech, Bitcoin, ISM, FRB, Jobs
  

Markets broke lower for the week, but with some strong up days mixed in. Should more of those be expected?

Monday                                S&P 500 0.12% | NASDAQ 0.41%

Markets wavered late, although a tech rally continued to rage under the surface. There was very little economic data on the day. Bitcoin has been making headlines as it surged to new record highs in recent days. Access to crypto through Exchange Traded Funds has generated additional interest in the market.

Tuesday                                S&P 500 1.02% | NASDAQ 1.65%

ISM Services data slipped more than expected for February. Factory orders also slipped for the month. The tech rally paused as markets wait for the Federal Reserve Board (FRB) chair to testify before congress tomorrow. The tech boom is reliant on a lower rate environment for continued growth.

Wednesday                           S&P 500 0.51% | NASDAQ 0.58%

Job openings continued to show strength. This signals what could be a strong jobs report on Friday. FRB Chair Powell’s testimony before congress aided markets in their rebound. His statements sustained the course of rate cuts later this year under the pressure of lower inflation.

Thursday                               S&P 500 1.03% | NASDAQ 1.51%

Initial jobless claims data continues to show a job market that is holding up under higher interest rates. Weak jobs data would typically signal a down market (right now) as job strength means less need for rate cuts. To the contrary, tech stocks continued their rally considering favorable testimony from the FRB chair.

Friday                                    S&P 500 0.65% | NASDAQ 1.16%

Happy Jobs Friday! The unemployment rate surprisingly rose to 3.9% even with the economy adding 275K nonfarm payrolls. The job growth was offset by job losses where 6.5M people are currently unemployed. Continued strength in the jobs market sent markets lower. 3.9% unemployment is a step in the right direction, however, 275K job adds is not a weak job market…

Conclusion                            S&P 500 0.26% | NASDAQ 1.17%

Our two up days of the week came while the FRB was testifying before congress. If this were 2022 the performance would be quite opposite. However, the tone of the FRB has shifted to a more accommodative stance. Markets eagerly await the FRB’s first rat cut. Market activity for the week includes data on CPI, PPI, Retail Sales, Jobs data, and Consumer Sentiment. All of which will help clarify the future stance of the FRB.

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Markets retreated further on aggressive Fed intervention. Can they avoid thwarting economic growth and manufacture a “soft landing”?

Monday S&P 500 3.88% | NASDAQ 4.68%

Monday began much as Friday ended. Markets headed south from the open and stayed there throughout the day. This left the S&P 500 closing officially in bear territory. This represents a close down 20% from recent highs (January 3rd). It was viewed as an investor reaction to the Federal Reserve Board (FRB) meeting later this week. Recent higher than expected inflation may make for more aggressive action from the FRB.

Tuesday S&P 500 0.38% | NASDAQ 0.18%

Markets struggled to find direction on Tuesday. This was likely an anticipatory day as the FRB meeting results will be out on Wednesday. In a break from recent trends, the NASDAQ outperformed the S&P 500.

Wednesday   S&P 500 1.46% | NASDAQ 2.50%

The NASDAQ led the way higher on markets Wednesday. This came in response to an FRB hike of .75%, leaving the Fed Funds Rate at 1.5%. They made comment in the post meeting press conference that their year-end target is now updated from 3% to 3.5%.

Thursday   S&P 500 3.25% | NASDAQ 4.08%

Markets started in the red and accelerated through the close as a pointed response to the biggest rate hike by the Federal Reserve since 1994. Rate hikes of this size are unusual, but Powell has said they will act to subdue inflation which spurred more selling. Mortgage rates continued their rise as rates responded to the Fed’s Hawkish policy.

Friday   S&P 500 .22% | NASDAQ 1.43%

Markets started a rebound bid in early trading and fluctuated throughout the day following comments by Jerome Powell of the Federal Reserve. The volatility index rose to 33 from 27.8, proving the queasy feelings across broad markets. 2-year Treasury yields finished the oscillating week at 3.17% because of rate pressures and earnings outlook for growth.

Conclusion   S&P 500 5.79% | NASDAQ 4.78%

Markets felt continued pressure as all indexes retreated on the week. The possibility of a “soft landing” is still on the table but it’s too early to tell. This term is used when there is more restrictive policy in place at the Central Bank and ultimately could determine whether the economy slows down too abruptly or softly. Markets have been responding accordingly. A key measure will be if the volatility index eases in coming weeks.

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.