08|23|2022

Is the Rally Over? | August 19, 2022

Chaos on the red sofa after new year party
AUTHOR: Jason J. Roque, MS, CFP®, APMA®, AWMA®
TITLE:       Investment Adviser Rep – CCO
TAGS:   S&P 500, NASDAQ, FRB

The rally is over, or is it? Markets fell last week, but should we expect it to continue?

Monday   S&P 500 0.40% | NASDAQ 0.62%

China lowered keys rates over night which yielded a bullish market at open. Heavy stimulus from China could signal a resurgence of activity later this year. This week will be heavy on consumer retail earnings.

Tuesday   S&P 500 0.18% | NASDAQ 0.20%

Markets started the day in the red and floated into the green as the day progressed. Earnings out of Walmart beat expectations. Consumers are shifting their spend but still spending. They reported that the recent relief in fuel expenses has translated to consumer spending.

Wednesday   S&P 500 0.72% | NASDAQ 1.25%

Energy prices increased on the day, raising concerns about future inflation. US exports of fuel increased last month as the US begins to replace Russian fuel supplies to Europe. Target failed to meet earnings expectations as inventories dragged on their performance. Federal Reserve Board (FRB) minutes from their last meeting were released. They showed an indication of slowing rate hikes ahead. Markets rebounded briefly on the news. Markets remained in the red throughout the day and ended there.

Thursday   S&P 500 0.23% | NASDAQ 0.21%

Markets moved sideways most of the day trying to find a reason to rise. They did so in the final hour, but not by much. Short term interest rates floated down on the day and interest rate expectations softened. Oil prices firmed on the day, which will provide a contradictory opinion in coming days.

Friday   S&P 500 1.29% | NASDAQ 2.01%

The equity markets retreated on Friday as anticipation builds towards the FRB’s meeting in Jackson Hole next week. As a result, the markets saw equities selloff, yields climb, a stronger dollar, and higher fuel-based commodities.

Conclusion   S&P 500 1.21% | NASDAQ 2.62%

Welp, it was fun while it lasted, but the four-week rally seems to have lost steam. Markets closed the week in negative territory for the first time in five weeks. Eyes seem to be turning to Jackson Hole. The anticipation of a hawkish FRB will likely be fulfilled. As the economy continues to weaken with the current FRB activity, their resolve to stay hawkish will be tested. In the short run this could mean negativity, but in the intermediate term it should mean opportunity.

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