Recession Fears Resurface
Renewed recession worries dented investor sentiment, and the week kicked off with a weekend announcement by OPEC+ nations of their intention to cut oil production.
The prospect of higher oil prices not only revived inflation fears, possibly hurting the chances of a rate-hike pause by the Fed, but it raised concerns over future consumer spending. Stocks weathered the news well but buckled on weak manufacturing and services data in subsequent days.
Stocks trended lower again after a lower-than-expected open-jobs number and a slowdown in private-sector hiring. Stocks stabilized to close on Thursday, despite an increase in jobless claims and a pick up in March layoffs.
The first week of the second quarter was negative for large cap growth stocks as both the S&P 500 and NASDAQ finished the week at -0.06% and -1.08% respectively.
However, large cap value stocks outperformed with the DJ Industrial Average advancing +0.69% on the week.
Domestically, small cap (-2.65%) and mid cap (-1.87%) stocks sold off more than large caps, which were down -0.06%.
Bonds, both domestic and global, were positive for the week, with global bonds fairing slightly better. The Bloomberg U.S. AGG Bond index returned +0.69 %, and Bloomberg Global AGG index +0.49%. U.S. credit, with Bloomberg U.S. Corporate High Yield TR USD serving as proxy, was also slightly positive for the week with a return of +0.09%.
Missing Out on High Saving Account: Per a March 2023 Bankrate survey, the average online savings account currently boasts a 3.33% APY. Here’s the weird part: The survey found that only 22% of adults in the U.S. with savings have APYs of 3% or higher, and 16% reported earning no interest at all. This may be partially because folks in that same survey reported that they were uncomfortable with online banking.2
Return to Office (RTO) - Big-name employers continue to introduce return-to-office (RTO) mandates. In 2022, the number of companies moving away from remote work increased, with 72.5% having “little to no” remote work compared to 60.1% from 2021, per the labor department. A 2020 Upwork study calculated that workers had saved $2,000 ($90 billion total) since mid-March of that year just by forgoing car commutes. A year later, 57% of remote workers who responded to a Bankrate survey (especially the younger workers) said their work-from-home arrangements benefited their finances. Where is the RTO pull more likely to hurt commuters? When taking both annual fuel costs and costs of commute into account, Detroit, Michigan, leads the pack, according to Bankrate. The average annual cost to get to the office in the Motor City is higher than any other city at $12,801, though New York City ($12,148) and Los Angeles ($10,101) are close runners-up.3
Wedding Season: Per a new report by Bankrate, Gen Zers and millennials expect to spend around $1,200 to attend weddings this year. Respondents plan to spend an average of $611 per wedding, which accounts for $287 on travel and accommodations, $180 on gifts, and $144 on getting dressed up and looking pretty. Of course, that’s just the beginning for members of the bridal party.4
Reprinted with permission from BTN. Copyright © 2023 Michael A. Higley.
1. Data Obtained from Morningstar as of 4/7/2023
CPI (headline and core): Consumer prices (CPI) are a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate.
Retail Sales: Retail sales (also referred to as retail trade) tracks the resale of new and used goods to the general public, for personal or household consumption. This concept is based on the value of goods sold.
Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States of America.
Producer Prices - PPI (headline and core): Producer prices (output) are a measure of the change in the price of goods as they leave their place of production (i.e. prices received by domestic producers for their outputs either on the domestic or foreign market).
ISM Manufacturing Index: PMI Surveys track sentiment among purchasing managers at manufacturing, construction and/or services firms. An overall sentiment index is generally calculated from the results of queries on production, orders, inventories, employment, prices, etc.
ISM Services Index: PMI Surveys track sentiment among purchasing managers at manufacturing, construction and/or services firms. An overall sentiment index is generally calculated from the results of queries on production, orders, inventories, employment, prices, etc. Target Audience: supply management professionals Sample Size: 300 individuals Date of Survey: through the month The Services Index is a composite index of four indicators with equal weights: Business Activity, New Orders, Employment and Supplier Deliveries. An index reading above 50% indicates an expansion and below 50% indicates a decline in the non-manufacturing economy. Where as per Supplier Deliveries Index, above 50% indicates slower deliveries and below 50% indicates faster deliveries.
Job Openings – JOLTS: This concept tracks the number of specific job openings in an economy. Job vacancies generally include either newly created or unoccupied positions (or those that are about to become vacant) where an employer is taking specific actions to fill these positions.
Employment Situation Summary (Jobs Report): The Employment Situation Summary released by the US Bureau of Labor Statistics is a report that presents statistics from two monthly surveys. The household survey measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry.
S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.
Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.
MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.
MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
Bloomberg Barclays U.S. Agg Bond: The Bloomberg Barclays U.S. 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 securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.
Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.
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4/7 Market View Weekly: By the Numbers
April 12, 2023