Weekly Economic Update

  • Economic data for the week included U.S. GDP for the first quarter being revised down slightly, while personal income and spending have remained relatively strong. Durable goods and home prices also showed higher readings, the ISM manufacturing survey showed expansion but at a lower rate, while consumer sentiment has continued to deteriorate.
  • Global equity markets declined again, ending a poor quarter, due to ongoing fears of a potential central bank-fueled recession. Bonds, however, fared positively in the U.S. as interest rates fell back from highs. Commodities declined, as economic slowdown fears have caused a pullback in prices for metals and grain supplies have moved higher.

U.S. stocks fell back last week, with continued concerns over a hawkish Fed (along with their own comments) that rising rate policy pushing the economy into recession is quite possible, coupled with continued poor sentiment. The S&P closed out the worst first half of a calendar year since 1970, with both stocks and bonds posting consecutive quarterly declines for only the second time since 1980. By sector, defensive utilities gained 4%, followed by energy and consumer staples. Cyclical areas consumer discretionary, technology, and communications fell back by up to -5%. Real estate lost a half-percent, tempered by the drop in interest rates during the week.

Foreign stocks declined in similar magnitude to U.S. equities, with Europe faring a bit worse than other regions, with differing expectations about potential ECB rate hikes this summer. Emerging markets fared a bit better, with flattish results from China and Brazil. Chinese equities, following a stretch of poor economic results and lockdowns, have benefitted from stronger investor interest considering perhaps the worst being past, with improving industrial activity and low starting valuations.

U.S. bonds gained ground last week, as interest rates continued to tick back downward. Treasuries outperformed investment-grade corporates, as spreads widened again. High yield, on the other hand, lost ground for the week. A stronger dollar was a headwind for foreign bonds, but foreign developed market governments still performed positively, while emerging market debt was mixed.

Commodities fell back last week, led by declines in grains and industrial metals. Grain prices recently have been affected by Russian unloading onto the world market, both to generate revenue, and provide countries needed supply, as well as benign growing weather elsewhere. The price of crude oil ticked back up by nearly a percent to above $108/barrel, with prices falling back from June highs due to rising OPEC production. Natural gas, on the other hand, corrected back by -9% on the week. Commodities were the only asset class in Q2 with a positive return, and have earned returns over 35% year-to-date, as measured by the S&P GSCI index. Despite many years of disappointment, disrupted supply/demand conditions have allowed commodities to shine during a difficult period for other financial assets.

Period ending 7/1/20221 Week (%)YTD (%)
DJIA-1.27-13.54
S&P 500-2.18-19.11
NASDAQ-4.12-28.60
Russell 2000-2.09-22.54
MSCI-EAFE-2.19-20.18
MSCI-EM-1.58-18.27
Bloomberg U.S. Aggregate1.27-9.81
U.S. Treasury Yields3 Mo.2 Yr.5 Yr.10 Yr.30 Yr.
12/31/20210.060.731.261.521.90
6/24/20221.733.043.183.133.26
7/1/20221.732.842.882.883.11

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. 

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