Stocks and Bonds Down Slightly After Volatile Week
Good morning,
The Dow (-0.1%), NASDAQ (-0.2%), and S&P 500 (-0.0%) were down slightly for the week. Meanwhile, taxable bonds fell 0.8% and tax-free municipal bonds lost 0.5%. The 10-year Treasury yield rose 0.15% to finish the week at 3.94%.
Wow, what a week! Stocks started the week with one of its worst performances in years, as all three indices fell between 3% and 5% for the day. As noted in a video link of an interview with our CFA consultants sent out last Thursday, this was in response to a “carry trade” in Japan that caused the Japanese stock markets to fall 12%. The media was reporting this as investors’ fear of a recession which further spooked investors and the markets. Granted, there was some weaker economic data reported at the end of the prior week, but it wasn’t bad enough to warrant the blood bath we saw on Monday. As the week progressed, more economic data rolled in that thwarted recession fears, and the markets climbed almost all the way back.
It is important to note that slowing growth is not the same as negative growth. For example, if you’re driving 55 mph down the highway, and you slow down to 40 mph, you’re still moving. It’s not as if the car is in reverse, right? The two graphs below (also shown in the attachment written by our CFA consultants) help explain the story regarding the jobs market, arguably the most notable economic data that has moved the markets in the past couple weeks. The first chart shows the 4-week average of unemployment claims, and the steady rise since January has many investors worried. However, to put that into perspective, we look at the second chart that shows the historical levels of unemployment claims, and recessions (shaded areas) weren’t typically underway until the jobless claims hit 300,000, compared to the 240,000 we are currently seeing. Thus, while the job market is slowing, it is also historically very strong, and that is an important measure of our economic strength. That said, all eyes continue to be on the job market and its trend.
Please note that many of us will be out this week attending a conference (or vacation), so our ability to respond will be limited. However, Andres and Barbara will be in the office to assist, as needed. Have a great day and terrific week!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
