Weekly Market Commentary
June 27, 2022
The Markets
Last week, bad news was good news.
Consumers were feeling blue in June, according to the University of Michigan Consumer Sentiment Survey. The survey scored sentiment at 50, which was the lowest level on record. Surveys of Consumers Director Joanne Hsu reported that 79 percent of consumers anticipate business conditions will decline during the next 12 months, and almost half indicated they are spending less because of inflation.
Consumer pessimism was reflected in the S&P Global Flash US Composite PMI™. The Index measured that manufacturing growth was at the lowest level in almost two years. “Declines in production and new sales were driven by weak client demand, as inflation, material shortages and delivery delays led some customers to pause or lower their purchases of goods,” reported S&P Global. The Index was at 52.4. Any reading above 50 indicates growth.
Unhappy consumers and slower growth in manufacturing made investors very happy. Consumer spending drives the economy. So, if consumers begin to spend less and economic growth slows, then the Federal Reserve may slow its rate hikes or raise rates by less. Last week Fed Chair Jerome Powell told Congress:
“The tightening in financial conditions that we have seen in recent months should continue to temper growth and help bring demand into better balance with supply…Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”
Despite their pessimism, consumers’ expectations for inflation moved lower in June. They anticipate inflation will be about 5.3 percent in the year ahead, and in the range of 2.9 percent to 3.1 percent over the longer term.
Last week, major U.S. stock indices rallied, reported Emily McCormick of Yahoo! Finance. Yields on shorter maturity Treasuries moved higher last week, while yields on longer maturity Treasuries moved lower.
Data as of 6/24/22 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor's 500 Index | 6.5% | -17.9% | -8.3% | 9.9% | 9.9% | 11.5% |
Dow Jones Global ex-U.S. Index | 2.1 | -19.2 | -21.4 | -0.2 | 0.3 | 3.2 |
10-year Treasury Note (yield only) | 3.1 | N/A | 1.5 | 2.0 | 2.1 | 1.6 |
Gold (per ounce) | -0.9 | 0.3 | 2.3 | 9.1 | 8.0 | 1.5 |
Bloomberg Commodity Index | -4.3 | 22.3 | 31.3 | 15.1 | 8.7 | -0.6 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.