Market Update: May 20, 2022

Welcome to the weekly market update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth and here’s what happened in the market this week.

 

 

This was a particularly nasty week that culminated in a 4% sell-off on Tuesday May 17th. As of this morning, this bear market that began in January is down 18.5% for the S&P.

In the news this week, the market is trading like a recession is imminent with indiscriminate selling that has now spread beyond the high volatility tech space. China’s central bank cut its borrowing rate as growth continues to fall. And Target and Walmart earnings calls highlighted inflationary pain felt in the US consumer. Both companies mentioned a change in consumer behavior due to high prices.

The 2022 selloff has largely been contained to high beta tech and discretionary stocks until this week when the contagion spread to staples. Since November of 2021, investors have elected to overweight protectionary staples in lieu of higher growth discretionary stocks. That trend reversed this week and may indicate a reversal of the selling pressure on discretionary stocks as well as high valuation staples coming back down to Earth or some combination of the two. While overall selling continues, this bear market will likely not find a bottom until discretionary stocks show continuous relative strength.

The AAII Bullish sentiment index is a survey from investors on their feelings on the state of the market. This index is considered a contrarian indicator. The index tends to peak right before market weakness and trough right before market rallies. Currently, the sentiment index is near all-time lows which may indicate that we are at peak bearishness and may be near the bottom.

And we got more good news on the economy this week. The leading economic index, a composite of several different leading economic indicators, has reached a new all-time high. Typically, this index falls right before serious recessions and this index is not showing negative growth indicating the economy remains fairly strong despite the fact that the market is trading like it’s weak.

For more information on this topic or a variety of other topics including market updates, financial planning, and wealth management please like, subscribe, and follow. Don’t forget to check out our new podcast Up and to the Right! New episodes for Up and to the Right drop on a bi-weekly basis on all your favorite podcasting apps.

Sources:

1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved May 20, 2022, from FactSet Database.

2.FactSet Research Systems. (n.d.). Equal weight staples relative to equal weight discretionary (Interactive Charts)). Retrieved May 20, 2022, from FactSet Database.

3.American Association of Individual Investors. Sentiment Survey Historical Data. Updated May 18, 2022. Retrieved from https://www.aaii.com/sentimentsurvey/sent_results

4.The Conference Board. The Leading Economic Index for US. Updated May 19, 2022. Retrieved from https://www.conference-board.org/topics/us-leading-indicators

Signature Wealth Management Group is registered as an investment adviser with the SEC. Signature Wealth only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.

 

Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.

 

Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. The use of words such as “will”, “may”, “could”, “should”, and “would”, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

 

Information is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.

The S&P U.S. Style Indices measure the performance of U.S. equities fully or partially categorized as either growth or value stocks, as determined by Style Scores for each security. The Style series is weighted by float-adjusted market capitalization (FMC), and the Pure Style index series is weighted by Style Score subject to the rules described in Index Construction.

All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual performance. The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Please refer to the methodology paper for the Index, available at www.spdji.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations.