Holbrook Insights

Weekly Market Update - June 6, 2022

The U.S. Department of Labor reported that employers added 390,000 jobs in May. At the same time, the unemployment rate remained flat at 3.6 percent. These strong employment conditions bolster the Federal Reserve (Fed)'s ability to move forward with aggressively hiking interest rates to hamper inflation. With market conditions and Fed officials' sentiments pointing to support for consecutive 50 basis point (bp) increases at the June and July meetings, focuses now shift to the September meeting and where interest rates are expected to go from there. Speaking on the matter, Fed Bank of Cleveland President Loretta Mester offered her thoughts. “If by the September FOMC meeting the monthly readings on inflation provide compelling evidence that inflation is moving down, then the pace of rate increases could slow. But if inflation has failed to moderate, then a faster pace of rate increases could be necessary,” she said. “The risk of recession has risen, but because underlying aggregate demand momentum and the demand for labor are so strong, a good case can still be made.”

Weekly Market Update - May 23, 2022

As the U.S. continues to battle inflation near 40-year highs and equity investors become increasingly spooked, the Federal Reserve (Fed) reminds us that corralling inflation is its primary goal. 
 
The S&P 500 fell 3 percent last week, marking the 7th straight week of declines and the longest streak of weekly declines since 2001. The index flirted with falling in bear market territory (a total decline of 20 percent from its peak) but rallied slightly on Friday to avoid the mark. The market continues to deal with inflation and the Fed’s policy concerns. We also saw consumer spending trends—which shifted from big ticket items such as outdoor furniture and electronics to consumer staples—hurt retail chains such as Walmart (WMT) and Target (TGT) last week. 

Weekly Market Update - May 16, 2022

The U.S. Senate confirmed Federal Reserve (Fed) Chair Jerome Powell to his second term last week as the U.S. continues to grapple with its highest rate of inflation in 40 years. With the FOMC June meeting approaching, incoming economic data will be closely monitored to better gauge potential interest rate paths moving forward. Fed Bank of Cleveland President Loretta Mester indicated her support for continuing an aggressive tightening policy in the coming months. "Given economic conditions, ongoing increases in the Fed funds rate are called for, and unless there are some big surprises, I expect it to be appropriate to raise the policy rate another 50 basis points [bps] at each of our next two meetings.”

Weekly Market Update - May 2, 2022

As we approach the Federal Reserve (Fed)'s May 3-4 meeting, last week's GDP report for the first quarter of 2022 is a poignant reminder of the fine line the Fed must walk to appropriately balance the risks of continued inflation and the potential for a rate-induced recession. The production decline of 1.4 percent on an annualized basis marks the weakest quarter since spring of 2020 when the Covid-19 pandemic initially kicked off in the United States. Still, the underlying data and strength of consumers and businesses point to continued growth for the U.S.—if supply chain issues continue to ease and the pandemic remains at bay.

Weekly Market Update - April 18, 2022

Inflation increased 8.5 percent year-over-year in March, according to data released last week. Faced with this multidecade high, markets eagerly await the Federal Reserve’s (Fed’s) May meeting to see what’s in store for interest rates and the Fed’s balance sheet.
 
The S&P 500 fell for the second straight week. Investors continue to question how the Fed will navigate a soft landing for the economy with inflation and expectations for inflation reaching historic highs. Earnings season got rolling, with JPMorgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley among notable banks reporting.

Weekly Market Update - April 4, 2022

The U.S. Labor Department's Friday report showed 431,000 jobs added in March, bringing the unemployment rate down to 3.6 percent. With employment numbers continuing to bolster the case for a more aggressive interest rate path moving forward, a rate hike of 50 basis points (bps) at the Federal Reserve (Fed)'s May meeting seems to be gaining momentum. U.S. Treasury yields were relatively stable over the past week with modest movements across the curve. 
 
On Tuesday, the Conference Board Consumer Confidence survey for March was released. The report showed that confidence rose from a downwardly revised 105.7 in February to 107.2 in March against calls for 107. Improving consumer views on the current state of the economy drove this modest rebound after it hit a one-year low in February, as the subindex rose to its highest level since last July. Declining medical risks and continued improvement for the labor market played a part in this improvement.

Weekly Market Update - March 15, 2022

February inflation numbers show a 7.9 percent increase in prices over the past 12 months, marking the fastest Consumer Price Index (CPI) acceleration since 1982 with oil prices adding to the pressure. All eyes will be on the Federal Reserve (Fed) this week as we wait to see what comes out of the March 15-16 meeting.
 
U.S. equities fell for a second consecutive week as geopolitical tensions continued to weigh on both stocks and investors’ minds. Ukrainian and Russian diplomats met again last Thursday but failed to reach an agreement for a ceasefire. Energy stocks continued their move higher despite a more than 5 percent drop in in WTI crude following last week’s 26 percent boost. Utilities and materials stock also performed well as short-term inflationary pressure loomed over equity markets.

Weekly Market Update - March 7, 2022

Global markets fell last week as investors took a risk off approach amid uncertainty surrounding the conflict in Ukraine. The combination of heavy sanctions and cutting business ties led to defensive positioning by investors. The largest moves last week were in energy and commodities since Russia and Ukraine are major global producers.
 
We finished the week with Friday’s release of the February employment report. The report showed 678,000 jobs were added during the month, far greater than the forecasted 423,000. The December and January job reports were also revised up by an additional 92,000 jobs. This better-than-expected result marks the best month for job gains since October 2021, indicating that the impact from the recent wave of infections on hiring has largely declined.

Weekly Market Update - February 28, 2021

Global markets fell last week as investors took a risk off approach amid uncertainty surrounding the conflict in Ukraine. The combination of heavy sanctions and cutting business ties led to defensive positioning by investors. The largest moves last week were in energy and commodities since Russia and Ukraine are major global producers.
 
We finished the week with Friday’s release of the February employment report. The report showed 678,000 jobs were added during the month, far greater than the forecasted 423,000. The December and January job reports were also revised up by an additional 92,000 jobs. This better-than-expected result marks the best month for job gains since October 2021, indicating that the impact from the recent wave of infections on hiring has largely declined.

Weekly Market Update - February 14, 2022

The U.S. Treasury curve saw further flattening last week, increasing on the short end of the curve and remaining relatively flat on the longer end of the curve.
 
Markets were mixed last week. Growth sectors such as technology, communication services, and consumer discretionary stocks sold off sharply. Value sectors such as energy, materials, and financials fared better, which is a theme for 2022 thus far. Thursday’s hotter-than-expected January Consumer Price Index (CPI) report indicated a 0.6 percent month-over-month increase and saw bond rates move higher.