Previous week's weekly market wrap

In a year that has featured plenty of volatility, last week's daily stock-market swings, which included both the largest daily gain and daily decline of the year, may have felt like something new was afoot. We would hardly file this under "much ado about nothing," but we don't think this should be interpreted as a sign that a new threat or narrative to the market has surfaced. Instead, we think this volatility is an ongoing symptom of this phase in which markets are struggling to handicap the outcome of this faceoff between Fed tightening and a still-viable expansion.
Put plainly, while extreme swings in the markets may seemingly imply increased uncertainty, events and data last week simply confirmed what we already knew -- the Fed is going to keep tightening and the economy is still in decent (but not perfect) shape. Here are four key things that last week told us about the path ahead:
1. The Fed will keep its foot firmly on the brake to avoid steering into the ditch.
2. The market is pricing in a recession. We think risks are rising, but a recession is hardly guaranteed.
Source: FactSet
This chart shows that the unemployment rate has fallen sharply and remains low compared to historical standards.
3. The bulk, but not all, of the rising-rate path has been traveled.
Source: FactSet. Past performance does not guarantee of future results
This chart shows that the bulk of increases to the 10-year treasury yield take place before the fed hiking cycle.
4. The stock market isn't as spry as it used to be, but now is not the time to throw in the towel.
Source: FactSet, the S&P 500 is unmanaged and cannot be invested in directly. Past performance does not guarantee of future results.
This chart shows that rate hiking cycles have caused drawdowns in the S&P 500 in the past.
Craig Fehr, CFA
Investment Strategist
INDEX | CLOSE | WEEK | YTD |
---|---|---|---|
Dow Jones Industrial Average | 32,899 | -0.2% | -9.5% |
S&P 500 Index | 4,123 | -0.2% | -13.5% |
NASDAQ | 12,145 | -1.5% | -22.4% |
MSCI EAFE * | 1,972.82 | -3.0% | -15.5% |
10-yr Treasury Yield | 3.13% | 0.2% | 1.6% |
Oil ($/bbl) | $110.51 | 5.6% | 46.9% |
Bonds | $101.57 | -1.3% | -10.0% |
Source: Factset. 05/06/2022. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results. * Source: Morningstar, 05/09/2022.
Important economic data being released this week include inflation and hourly earnings growth.
Craig Fehr is a principal and the leader of investment strategy for Edward Jones. Craig is responsible for analyzing and interpreting economic trends and market conditions, along with constructing investment strategies and and asset allocation guidance designed to help investors reach their financial goals.
He has been featured in Barron’s, The Wall Street Journal, the Financial Times, SmartMoney magazine, MarketWatch, the Financial Post, Yahoo! Finance, Bloomberg News, Reuters, CNBC and Investment Executive TV.
Craig holds a master's degree in finance from Harvard University, an MBA with an emphasis in economics from Saint Louis University and a graduate certificate in economics from Harvard.