Performance for Week Ending 5.13.2022:
The Dow Jones Industrial Average (Dow) finished down 2.14%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) fell 2.52%, the Standard & Poor's 500 Index (S&P 500) slumped 2.41% and the Nasdaq Composite Index (NASDAQ) closed off 2.80%. Sector breadth was negative with 10 of the 11 S&P sector groups closing lower. The Real Estate sector (-3.86%) was the worst performer followed by Financials (-3.58%) and Technology (-3.50%). The Consumer Staples sector bucked the trend, closing up 0.3%.
||Closing Price 5/13/2022
||Percentage Change for Week Ending 5/13/2022
||Year-to-Date Percentage Change Through 5/13/2022
*See below for Index Definitions
MARKET OBSERVATIONS: 5/9/22 – 5/13/22
Stocks closed the week lower with the S&P 500 extending its losing streak to six straight weeks. Trading was very volatile as investors continued to worry that elevated levels of inflation and the Federal Reserve’s effort to tame inflation could send the economy into a tailspin. Fresh data during the week showed that inflation is beginning to ease, however, the headline consumer price index remained above 8 percent for a second straight month. Hawkish remarks from Fed Bank of Atlanta President Raphael Bostic added to the negative tone after saying he’s open to “moving more” on rates if inflation persists at elevated levels.
Four More Years for Powell: In a bipartisan 80-19 vote, the Senate finally confirmed Fed Chair Jerome Powell for a second four-year term. In an interview on NPR’s Marketplace program during the week, Powell said that if the economy performs as the Fed expects, the central bank will raise the interest rate an additional 50 basis points at each of the next two meetings. "If things come in better than we expect, then we're prepared to do less. If they come in worse than we expect, then we're prepared to do more," Powell continued. "I will also say that the process of getting inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels, and we know what that's like." The central bank's tools for taming that inflation are only focused on demand, and "supply is a big part of the story here." There are additional factors such as the war in Ukraine and new lockdowns in China to limit the spread of COVID-19, so there is no guarantee "whether we can execute a soft landing or not... it may actually depend on factors that we don't control."
Q1 Earnings – Better than Initially Feared: Through Friday, 457 members of the S&P 500 have released results with 76% surprising to the upside. Aggregate earnings growth is up 10% 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 16x the 2023 estimate and under 15x the 2024 estimates. While certainly not a cheap market, it is much less expensive than we’ve seen in recent years.
The Week Ahead: The strength of the consumer will be the focal point during the coming week with April retail sales due out on Tuesday. According to Bloomberg, headline retail sales are expected to advance by 0.9%. Other data reports of interest include; regional manufacturing reports from the New York and Philly Federal Reserve banks, April housing starts, initial jobless claims, existing home sales for April and the Index of Leading Economic indicators for April. Earnings season will continue to wind down with only 16 members of the S&P 500 scheduled to release results, many of them from the retailing sector. The Fed speaking calendar will be busy with seven appearances on the docket, including Fed Chair Powell on Tuesday.
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.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.
Investing involves risk, including the possible loss of principal.
*Assets under management is as of 03.31.2022 and includes leverage of $20.0bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Fund Management (Europe) Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
Guggenheim Investments. All rights reserved.
Research our firm with FINRA Broker Check.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.