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Market Commentary: U.S. Markets Rally But Face Uncertainty Amid Russia-Ukraine Conflict

Market Commentary

Market Commentary: U.S. Markets Rally But Face Uncertainty Amid Russia-Ukraine Conflict

U.S. stocks rallied after Russia invaded Ukraine on Thursday. The news that the initial sanctions wouldn’t target Russian energy exports to Europe reduced concerns about a European economic slowdown. While global markets declined last week, the U.S. finished higher even though the S&P 500 moved by more than 1% on all four trading days.

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Market Commentary: How Russia’s Invasion of Ukraine Could Impact Markets, and How Investors Should Respond

Market Commentary

Market Commentary: How Russia’s Invasion of Ukraine Could Impact Markets, and How Investors Should Respond

Russia’s invasion of Ukraine on February 24 has pushed the S&P 500 into a deeper decline. Stocks had already fallen more than 10% in anticipation of the attack and concerns over inflation and higher interest rates. When the invasion proved to be on the aggressive end of expectations, markets initially fell even further.

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Market Commentary: Russia-Ukraine Tensions, Inflation Among Contributors to Market Volatility After Relatively Calm 2021

Market Commentary

Market Commentary: Russia-Ukraine Tensions, Inflation Among Contributors to Market Volatility After Relatively Calm 2021

Market uncertainty on multiple fronts is making it tough for investors. Russia’s ambitions in Ukraine, inflation, and some upheaval in individual securities are making it more challenging to bear risk than last year. 2021 was relatively calm, with only 80% as many 1% daily moves in the market as normal, and many of those were upswings. Who doesn’t love a 1% jump?

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Market Commentary: Inflation, Potential Rate Hikes, Russia-Ukraine Tensions Weigh Heavily on Markets

Market Commentary

Market Commentary: Inflation, Potential Rate Hikes, Russia-Ukraine Tensions Weigh Heavily on Markets

Inflation continues to move sharply higher. The Consumer Price Index (CPI) rose 0.6% last month and is up 7.5% in the last 12 months. The annual gain is the highest since February 1982. Big gains in energy and food helped fuel the outsized price hikes. Core CPI, which excludes food and energy, increased 0.6% as well.

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Market Commentary: Data Revisions Show Surging Jobs Market, Though Nearly 11 Million Openings Remain

Market Commentary

Market Commentary: Data Revisions Show Surging Jobs Market, Though Nearly 11 Million Openings Remain

 The U.S. jobs market provided most of the major economic news last week. The latest establishment survey estimated 467,000 jobs were added in January. Regular revisions in the most recent months added an additional 709,000 jobs. The job market appears stronger than expected.

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Market Commentary: Equity Markets Experience Another Volatile Week; Fed Signals Interest Rate Hike in Early March

Market Commentary

Market Commentary: Equity Markets Experience Another Volatile Week; Fed Signals Interest Rate Hike in Early March

Equity markets wrapped up a volatile week with a late-Friday surge that pushed the S&P 500 to a 0.8% gain. Each day last week experienced a swing of at least 2.25%. Ongoing concerns about interest rates, inflation, valuations, and geopolitical challenges are contributing to swings in the market.

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Market Commentary: Housing, Equity Markets Decline with Fed Expected to Hike Interest Rates

Market Commentary

Market Commentary: Housing, Equity Markets Decline with Fed Expected to Hike Interest Rates

Equity markets have given back some of last year’s gains. Higher interest rates appear to be the major cause. As the Federal Reserve prepares for its first meeting of the year, investors have raised the odds of four interest rate hikes to approximately 70% from less than 30% one month ago (Figure 1). Fed Chair Jerome Powell’s press conference after the meeting will likely be scrutinized for further guidance concerning interest rates.

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Market Commentary: U.S. Inflation Challenges Likely Linked to Robust Government Aid, Policy Changes

Market Commentary

Market Commentary: U.S. Inflation Challenges Likely Linked to Robust Government Aid, Policy Changes

Inflation remains a challenge to the U.S. economy. CPI rose 0.5% in December and surged 7.1% during the last year. It wasn’t all food and energy prices. Core inflation, which excludes those more volatile elements, increased 0.5% as well. As the bright blue line in Figure 1 shows, inflation has reaccelerated after dipping in the third quarter.

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Market Commentary: Job Surveys Show Conflicting Data; Fed May Shrink Balance Sheet Sooner Than Expected

Market Commentary

Market Commentary: Job Surveys Show Conflicting Data; Fed May Shrink Balance Sheet Sooner Than Expected

The employment report released last week may have raised more questions than it answered. The establishment survey, which surveys businesses, showed only 199,000 jobs were created, missing expectations of 400,000 (Figure 1). The household survey gave a very different picture. Unemployment fell to 3.9%, employment rose by 650,000, and 170,000 people joined the labor force. The gap is partly reconciled by reports new businesses are being formed at a rapid pace and the usually more accurate establishment survey isn’t keeping up with the underlying changes.

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Market Commentary: S&P 500 Finishes Second Year of Pandemic 28.7% Higher Than It Started

Market Commentary

Market Commentary: S&P 500 Finishes Second Year of Pandemic 28.7% Higher Than It Started

2021 was a very happy year for U.S. stock investors. The S&P 500 finished the second year of a pandemic 28.7% higher than it started the year. Other countries did not do as well. The MSCI ACWI, which includes U.S. stocks, rose 18.5% in 2021. Those returns are still very impressive, but they lag behind the S&P 500. Bonds declined slightly. The Bloomberg U.S. Aggregate Bond Index slipped 1.5% last year.

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