Weekly Market Update with Brian Ransom 1 April 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.
The market continues to extend gains above the 2-month downward trading pattern established at the beginning of the year. Currently, the S&P is up over 9% from the lows in early March.
In the news this week, the US continues to sanction parts of the Russian economy, including its technology segment. Consumer spending slowed in February as inflation showed signs of affecting consumer morale. And the Biden administration announced that they would tap strategic oil reserves to help stem higher prices throughout the world.
Something seemingly alarming happened earlier this week. Briefly, it appeared that the yield curve might invert. As discussed in previous episodes, under normal market conditions, the 10-year treasury bond is supposed to have a higher yield than the 2-year. But sometimes under abnormal market conditions, that curve will invert.
This yield curve inversion phenomenon has been a reliable signal for past recessions marked here in the shaded grey area. The 10-2 curve inverted in ’78 when Paul Volcker rapidly increased interest rates to fight inflation. A recession hit two years later. The curve inverted again in 1980 and again, a recession hit in ’81. 9 years later, the curve inverts followed by a brief recession in 1990. It inverted twice in the years prior to the Dotcom. Twice leading up to the Global Financial Crisis. And it briefly inverted about a year before the pandemic recession in 2020.
The problem is, not all economists believe the 10-2 is the best yield curve to follow. The 10-year minus 3-month is often more reliable as the 3-month treasury bill reflects what the Fed has actually done vs what the market believes it might do. Since the 1980’s this yield curve has inverted 4 times, preceding the previous recessions within a much closer time frame. Interestingly, this part of the curve is NOT inverting. In fact, it’s steepening. That doesn’t mean it won’t invert in the future, but right now, this curve remains bullish.
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. I will be taking next week off, so I’ll see you all in two weeks.
Sources:
1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved March 31, 2022, from FactSet Database.
2.Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/T10Y2Y, March 30, 2022.
3.Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity [T10Y3M], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/T10Y3M, March 30, 2022.
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.