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.
After a fairly strong rally at the end of March, the market has pulled back about 4%. Currently, the market is well off the all-time highs set at the beginning of the year.
In the news this week, Tesla CEO Elon Musk offered to take social media company Twitter private following his 9% minority acquisition of Twitter shares last week. Investment banking giant JPMorgan announced that they are raising cash in preparation for economic headwinds. And inflation here in the U.S. hit a new high of 8.5%.
The economic headwinds from the war in Ukraine, inflation, and subsequent actions taken by the Federal Reserve have caused several market indicators to flash red. The semiconductor index shown here has pulled back quite a bit from the March rally. Performance from this index relative to the S&P 500 actually shows a much more significant breakdown of the index indicating weakness in the technology sector.
Staples continue to rally against discretionary stocks and have done so since November. This indicates that investors are risk off in an accelerating fashion, preferring the well-defined, reliable cash flows from the consumer staples over the more cyclical discretionary stocks.
And finally, high yield credit spreads are starting to widen. This indicates that bond investors are risk-off as well, choosing to avoid the riskier portions of the bond market. A short peak, like what we saw in 2019, would be indicative of a shorter, smaller market pullback as opposed to the much more violent peak seen in 2020.
All-told, it appears that risk in the market and the economy are rising.
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1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved April 14, 2022, from FactSet Database.
2.FactSet Research Systems. (n.d.). SOXX (Interactive Charts). Retrieved April 14, 2022, from FactSet Database.
3.FactSet Research Systems. (n.d.). Consumer Staples Equal Weight relative to Consumer Discretionary Equal Weight (Interactive Charts). Retrieved April 14, 2022, from FactSet Database.
4.Ice Data Indices, LLC, ICE BofA US High Yield Index Option-Adjusted Spread [BAMLH0A0HYM2], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BAMLH0A0HYM2, April 13, 2022.
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