Weekly Economic Update: May 9th 2022

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Newsletter - 9 - 05 - 22

 

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May 9th, 2022

Author: SteelPeak Wealth –  Institute of Portfolio Management

The S&P finished a volatile week nearly flat after the Fed announced a 50bps increase in the fed funds rate. During the press conference, Jay Powell revealed that larger rate increases were unlikely in the coming months. The market rallied on the news with the S&P 500 finishing the day 3% higher; the largest daily gain since May 2020. Unfortunately, the gains didn’t hold up after the Bank of England announced additional rate increases and acknowledged the UK economy was likely already in a recession.

Friday’s jobs report for April 2022 showed continuing strength in the labor market with 428K new jobs added in April. Average hourly earnings rose less than expected (3.6% annualized vs 6% annualized in March 2022), which could be a sign that wage inflation is beginning to ease. However, there continues to be nearly twice as many open jobs as unemployed people in the US. As the Fed continues to tighten monetary policy, we should expect this gap to close as employers opt to cut back hiring plans.

 

 

The peak-to-trough decline in the S&P 500 surpassed 15% this morning. Periodic corrections are an unfortunate consequence of investing in equity markets. Last week, we shared a chart showing that since 1980 the average intra-year decline of the S&P 500 was 14%. Given the strong jobs growth over the last several months, we feel it is unlikely that we are heading into a recession. The chart below shows the peak-to-trough decline and the number of days between all-time highs for the S&P 500 since 1975. Corrections in the S&P 500 that exceed 20% often coincide with recessions and last much longer than those that do not occur during recessions (see red numbers below indicating days between all-time highs during recessions).

 

 

This week the Bureau of Labor Statistics will release the Consumer Price Index and Producer Price Index for April 2022 and markets will be watching closely. A slowing of inflation may suggest the Fed can slow their pace of rate increases, while an increase in inflation may force the Fed to be more aggressive.

 



T I P   O F   T H E   W E E K


Dropping a landline and just using your cell phone might save you money each year. For some, it’s a difficult legacy item to drop but this year might present a great opportunity.

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THE WEEK AHEAD: KEY ECONOMIC DATA

Wednesday: Consumer Price Index (CPI).

Thursday: Producer Price Index (PPI). Jobless Claims.

Friday: Consumer Sentiment.

Source: Econoday, May 6, 2022

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Tyson Foods, Inc. (TSN).

Tuesday: Occidental Corporation (OXY), Sysco Corporation (SYY).

Wednesday: The Walt Disney Company (DIS), Rivian Automotive, Inc. (RIVN).

Thursday: Affirm Holdings, Inc. (AFRM).

Source: Zacks, May 6, 2022

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

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Q U O T E   O F   T H E   W E E K

 

“A pleasure is full grown only when it is remembered.”

C.S. LEWIS

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T H E   W E E K L Y   R I D D L E

A librarian finds that pages have been ripped out of a novel. Pages 28, 29, 148, 211 and 212 are torn out. Given this, how many separate sheets of paper have been torn from the book?

LAST WEEK’S RIDDLE: What is the number missing within this sequence? 4, 7, 11, 18, 29, 47, __, 123, 199, 322.

ANSWER: The missing number is 76. Beginning with the third number in the sequence, each number is the sum of the two preceding numbers.

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SteelPeak Wealth –

Institute of Portfolio Management

For more financial news and resources, visit our Insights page ⇒

 


 
Steel Peak Wealth Management, LLC (“SteelPeak Wealth”) is an SEC registered investment adviser located in California. There is no guarantee that any views, projections and/or opinions expressed herein will come to pass. This report should not be construed by any prospective investor as SteelPeak Wealth’s rendering of any personalized investment advice. Information on the registration status of SteelPeak Wealth is available at www.adviserinfo.sec.gov. A copy of SteelPeak Wealth’s current written disclosure brochure is available upon written request.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.

Certain information contained herein has been provided by, or obtained from, third party sources. While SteelPeak Wealth believes that such sources are reliable, it cannot guarantee the accuracy of any such information and does not represent that such information is accurate or complete.
CITATIONS:
CITATIONS:
1. The Wall Street Journal, May 6, 2022
2. The Wall Street Journal, May 6, 2022
3. The Wall Street Journal, May 6, 2022
4. CNBC, May 5, 2022
5. CNBC, May 4, 2022


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