Broker Check
Strong Snapback in the final week of May

Strong Snapback in the final week of May

June 01, 2022
  • Economic data for the week included a slight downward revision in first quarter GDP, positive durable goods orders, along with weaker new home sales data and consumer sentiment.
  • Global equity markets rose broadly last week, with U.S. stocks outperforming foreign. Bonds also fared positively, with interest rates pulling back upon a possible peaking in inflationary pressures. Commodities rose due to gains in crude oil and natural gas.

After 7 consecutive down weeks, U.S. stocks moved sharply higher. In fact, last week’s strong snapback was one of 20 best-performing weeks since 1950. Every sector ended in the positive, led by consumer discretionary stocks up nearly 10% and energy over 8%, while health care lagged with only a 3% gain.

Following a decent Monday recovery, the macro environment had deteriorated further than anticipated. This also affects far larger firms. Growth rates remain high, so it’s possible this coming quarter or future quarters could be a ‘kitchen sink’ type of period, where all the bad news is thrown in under the category ‘economic slowing’, with hopes any stock-specific weakness can be swept under the rug. This is how it often happens. But is Snapchat a true bellwether of the U.S. economy?

Foreign stocks also fared positively last week, but to a lesser degree than in the U.S. The ECB noted it intends to exit its zero-interest rate policy by Sept., which caused the U.S. dollar to fall back. The ‘carry trade’ has been one of the reasons for the dollar’s strength this year, with the Fed acting in a more hawkish way than Europe, Japan, or the U.K., the primary currency pairs. Emerging market gains were largest in commodity-exporting Brazil, South Africa, and Mexico. Sentiment in China remains mixed, with reopenings commencing but internal debate about the zero-Covid policy and potential for a longer slowdown.

Interestingly, the U.K. introduced a 25% windfall tax on the energy industry, under the sentiment that oil and gas firms have profited overly from high commodity prices that have pressured inflation higher. Sentiment toward taxing the energy industry has occurred regularly over the years, particularly in years when high prices have resulted in high profits; on the other hand, lean years in the industry, where oil prices fall so low as to make extraction unprofitable or less profitable, little protection from bankruptcy is provided on the opposite site. 

U.S. bonds experienced a positive week again as interest rates fell back from recent peaks, in keeping with general thoughts that economic slowing could dampen the Fed’s hawkishness recently. Treasuries as a whole were less dramatically changed, while corporate bonds fared positively along with a strong week for equities. Foreign bonds fared positively, especially in emerging markets, helped by a weaker U.S. dollar.

Commodities fared well on the week, helped by a weaker dollar, with gains of 5% in energy outweighing mixed results in metals and little change in agriculture. The price of crude oil rose by over 4% to just over $115/barrel, and natural gas rose by 8% (bringing year-to-date gains to well over 100%).

Information is provided by Egan, Berger & Weiner, LLC and written by [author/publishing company], a non-affiliate of Cetera Advisor Networks LLC.
The views stated in this piece are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards.
The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value.
Cetera does not offer direct investments in Commodities.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ.
The NASDAQ Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad based index.
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
The MSCI EAFE Index is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted.
The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index.
The Bloomberg Barclays U.S. Aggregate Bond Index, which was originally called the Lehman Aggregate Bond Index, is a broad based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. Eligible bonds must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 8.25 years. This total return index, created in 1986 with history backfilled to January 1, 1976, is unhedged and rebalances monthly.