The Risk-Off Mood Continues

Stocks closed the week lower with the S&P 500 extending its losing streak to seven straight weeks and leaving the index just shy of ‘bear market’ territory.

May 23, 2022    |    By Michael Schwager

Performance for Week Ending 5.20.2022:

The Dow Jones Industrial Average (Dow) finished down 2.90%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) fell 2.40%, the Standard & Poor’s 500 Index (S&P 500) slumped 3.05% and the Nasdaq Composite Index (NASDAQ) closed off 3.82%. Sector breadth was negative with 8 of the 11 S&P sector groups closing lower. The Consumer Staples sector (-8.63%) was the worst performer followed by Consumer Discretionary (-7.44%) and Technology (-3.77%). On the upside, Energy (+1.09%) was the best performer followed by Healthcare (+0.90%) and Utilities (+0.36%).

Index* Closing Price 5/20/2022 Percentage Change for Week Ending 5/20/2022 Year-to-Date Percentage Change Through 5/20/2022
Dow 31261.90 -2.90% -13.97%
Wilshire 5000 38831.65 -2.40% -19.87%
S&P 500 3901.36 -3.05% -18.14%
NASDAQ 11354.62 -3.82% -27.42%

*See below for Index Definitions

MARKET OBSERVATIONS: 5/16/22 – 5/20/22

Stocks closed the week lower with the S&P 500 extending its losing streak to seven straight weeks and leaving the index just shy of ‘bear market’ territory. Stocks have come under pressure in recent weeks on concerns over global growth as investors worry about how aggressively the Federal Reserve will need to respond to high levels of inflation and how Covid-19 lockdowns in China will further impact already snarled supply chains. Weaker than forecast earnings reports from a couple bellwether retailers added to concern that the highest rate of inflation in four decades is starting to catch up with U.S. consumers. Record high gasoline prices also are starting to pinch consumer’s pocketbooks. According to the American Automobile Association, the average price of regular unleaded gas rose to $4.59 per gallon, more than double the price at the beginning of 2021.

The combination of all of these factors have raised anxiety levels that the US economy is heading toward a recession. Despite all the fear and market volatility we’ve been experiencing recently, there is currently very little evidence of a near term economic downturn. While many economic data points have slowed from last year’s blistering pace, growth expectations still remain solidly above the trendline we have experienced over the past decade. In addition, if the goal of monetary policy is to tighten financial conditions to slow things down, then things are working. Bond yields are higher, corporate spreads have widened, the equity market is down, and the US dollar has been strong. In other words, for only hiking rates by 75bps, the Fed seems to be getting a lot of bang for their buck. While the Fed will continue to hike rates to battle elevated levels of inflation, a continuing tightening of financial conditions could possibly lead to a less aggressive path higher.

Q1 Earnings Wrapping Up: Through Friday, 473 members of the S&P 500 have released results with 76% surprising to the upside. Aggregate earnings growth is up 9.4% on a year-over-year basis, solidly better than the 5.7% pace that analysts were forecasting at the start of April. On the sector level, nine of the eleven of the S&P sector groups have delivered positive growth with the strongest gains coming from cyclical sectors like Energy, Industrials and Materials. On the weak side, Consumer Discretionary and Financials have disappointed.

Tale of Two Halves? While the near-term outlook for the markets will remain clouded by the situation in Ukraine, elevated levels of inflation and concerns over the Federal Reserve’s response to inflation, we think as we move forward fundamentals will ultimately outweigh fears. The US economy remains in good shape and the probability of a recession in the coming quarters remains low. Consumer balance sheets are strong and savings rates are still elevated by over $2 Trillion. Money market mutual have over $4.5 trillion in cash and corporate buyback activity is expected to remain strong. Supply chain issues have also started to ease. Importantly, the earnings environment remains solid with high single digit growth expect this year and next. If there has been a silver lining to the recent market weakness, it’s been that valuation levels have moved lower with the S&P selling for just over 15x the 2023 estimate and under 14x the 2024 estimates. While still not a cheap market, it is much less expensive than we’ve seen in recent years.

The Week Ahead: Following last week’s better than forecast retail sales report, the strength of the US consumer will be front and center again this week with reports out on personal income and spending. Inflation will also be in the spotlight with the Fed’s preferred inflation gauge, the PCE, scheduled for release. Other data reports of interest include; the S&P Global manufacturing and services PMIs for May, April durable goods orders, the first revision to the Q1 GDP release, April new home sales, and weekly jobless claims. On the Fed front, five presentations are scheduled including Fed Chair Powell on Tuesday. The meeting minutes from the May FOMC meeting will be released on Wednesday. On the earnings front, 14 members of the S&P 500 are scheduled to release results, with about half of them coming from the retailing sector. The World Economic Forum’s annual meeting in Davos starts on Sunday and will runs through Thursday. It'll be the first in-person meeting since the pandemic began and geopolitics will likely be in focus.


The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

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.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.

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