MARKET VIEW WEEKLY

Geopolitical EVENTS

The build-up to Russia’s eventual invasion of Ukraine triggered elevated market volatility, resulting in broad-based selling that sent the S&P 500 into correction territory as the holiday-shortened week of trading began. The sell-off culminated on Thursday morning following the overnight incursion of Russian troops into Ukrainian territory, though markets staged a powerful late-day recovery that coincided with President Biden’s announcing fresh sanctions against Russia. The afternoon rebound was remarkable, as the S&P 500 ended 1.5% higher after being down more than 2.6%, while the Nasdaq Composite closed 3.3% higher after dropping nearly 3.5% intraday. Thursday afternoon’s momentum continued into Friday as stocks rallied to end the week in positive territory.

Observations

U.S. equities moved higher this week as indicated by the S&P 500 which was up +0.84% on the week. In the U.S., smaller sized companies outperformed their larger-sized counterparts, as the Russell 2000 index increased by +1.59% on the week. International stocks as measured by the MSCI EAFE were negative on the week, down -2.49%, underperforming domestic stocks. Emerging market stocks were down on the week with the MSCI EM decreasing -4.85%. U.S. investment grade bonds were negative last week with the Bloomberg Barclays U.S. Aggregate Bond index down -0.33%.

BY THE NUMBERS

CORRECTION - The S&P 500 closed at 4226 on 2/23/2022, down 11.9% from its 1/03/2022 closing high, the index’s 8th “correction” in the last 20 years, i.e., a fall of at least 10% but less than 20%. The S&P 500 consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research).

WHERE? - The average single-family home in the USA appreciated +54.5% for the 5 years ending 12/31/2021. Homes in Idaho (+118.2%) have experienced the greatest growth while homes in North Dakota (+23.5%) have seen the least percentage increase in value (source: Federal Housing Finance Agency).

MAKES IT HARDER TO BUY - The average 30-year fixed rate mortgage nationwide was 3.89% last Thursday (2/24/2022), resulting in a $471 monthly “principal and interest” payment per $100,000 borrowed. The lowest average 30-year fixed rate mortgage in US history was 2.65% on 1/07/2021 (14 months ago), resulting in a $403 monthly “principal and interest” payment per $100,000 borrowed (source: Freddie Mac).

WIDELY EXPECTED - If the Fed does raise short-term interest rates as expected following its March 15-16 meeting, it will be the first Fed rate hike since 12/19/2018 or 39 months earlier (source: Federal Reserve).

General News, Monthly Market Update, Newsletter, Timely Topics, Weekly Market UpdateMelissa MinterMarch 7, 2022General news, general news, timely topics

Overview

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The year began with the government stymied by a shutdown, and ended with articles of impeachment levied against the president. In between, both domestic and global economies showed signs of slowing, all while the trade war between the United States and China loomed throughout the year. Nevertheless, investors remained relatively bullish toward stocks, pushing several major indexes to record highs.

While domestic economic growth may have slowed in 2019 compared to 2018, it showed resilience and stamina. The third-quarter gross domestic product expanded at an annualized rate of 2.1% — moderately down from 2018's 3.0% rate, yet still strong enough to outpace global economic growth by a considerable margin. Consumer spending — which accounts for about two-thirds of the U.S. economy — surged, buoyed by a strong labor market, near-record unemployment, solid wage growth, and a burgeoning stock market. All told, the domestic economic expansion continued into its 11th straight year, the longest run in U.S. history.

Last year saw trade disputes between the United States and several of its trade partners reach an accord, but the trade war with China roared. The world's two largest economies engaged in a tit-for-tat skirmish, with each country volleying tariffs on their respective imports at the expense of the exporting nation. Coincidentally, a limited deal was announced just before the holiday shopping season, with the U.S. agreeing to forgo new tariffs and China assenting to allow more U.S. agricultural imports. Further negotiations are presumed, but the relationship between the economic giants remains tenuous at best.

Not only did the ongoing trade war affect global economies, but it also impacted domestic business investment, industrial production, and exports. Part of the justification cited by the Federal Reserve for lowering interest rates three times last year was weakness in business fixed investment and exports. As of November, new orders for durable goods were down 1.3% from the same period in 2018, and business (nonresidential) investment fell 2.3% in the third quarter.

The new year begins with a strong stock market and solid economic growth. The Secure Act, passed in late December, should change the retirement planning (and saving) landscape to some extent. However, the Treasury budget deficit for fiscal 2019 (October 2018-September 2019) exceeded $980 billion — 26% higher than the 2018 fiscal-year deficit. The trade war with China may cool with more mutual concessions, or accelerate, which would continue to dampen global economic growth. The new year will begin with the impeachment process and end with November's presidential election. What happens in between is anyone's guess. Will unemployment and inflation remain low? Will stocks continue to experience growth? Will oil and gas prices moderate or surge? Will the domestic economy continue to accelerate, or suffer a setback? Can the world economy recover, or will it continue to stagnate? If nothing else, 2020 looks to be an interesting year.

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MARKET VIEW WEEKLY

Overview

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