Mark Vickery Published on
QQQ SPY DIA
With the sound of Thursday’s closing bell, we put calendar Q1 2022 in the history books. By all accounts, it’s been a trying, trepidatious period, highlighted (lowlighted?) by the Russian invasion of Ukraine but relieved to an extent by the first official Fed tightening since the start of the pandemic over two years ago.
Going into the close, we saw big selling — all major indexes closed at session lows. However, this would appear to have more to do with portfolio positioning, quarter-end, than with any fundamental bearishness: the Dow dropped -550 points or -1.56%, the S&P 500 was -72 points or -1.57%, the Nasdaq -221 points or -1.54% and the small-cap Russell 2000 was -20 points or -0.95%. The end-quarter shift is further illustrated by the 3-to-1 sells to buys on the day.
It’s the first quarterly loss for the S&P in two years. Yet with the strong surge we’ve seen in the past three weeks — since the Fed raised interest rates a quarter-point — the S&P is somehow just -5% from its all-time highs set in the earliest days of the year. The quarter was shaping up to be quite terrible, but the past few weeks — today’s regular session notwithstanding — brought it back from the brink of despair.
Utilities and Energy were the only two winning sectors for the entire quarter, despite WTI and Brent crude taking a hit during today’s trading. Inflation is very real, at 40-year highs in some respects — just look at this morning’s PCE deflator numbers — and home prices (which lead to higher rents) and higher wage gains are those sticky kinds of inflation that take more time to burn off. A 25 basis-point hike may look like a spit in the ocean to some; if the Fed was concerned with an inverted yield-curve as a reason not to raise by 50 points, it looks like that inversion is here anyway.
On the other hand, employment figures are skyrocketing of late, with yesterday’s JOLTS survey +43.5% year over year. Wages, while adding to overall inflation metrics, are still bringing purchasing power to a wider swath of the American public. And pent-up demand after two years of basic confinement is already proving to be a big driver in the labor market and the Leisure & Hospitality sector. Finally, as Zacks Chief Economist John Blank said yesterday, that based on the past two years’ myriad extraordinary circumstances, “It is very unlikely this yield curve inversion offers a ‘sophisticated’ read thru, like so many quick-draw Twitter pundits offer.”
So there’s some food for thought. Suffice it to say we enter Q2 with robust employment figures expected and room to surge higher on market indexes. We have a Q1 earnings season that has already baked tougher year-over-year comparisons into the cake. In short, there is plenty to look forward to and many reasons to be reasonably cautious already accounted for.
Questions or comments about this article and/or its author? Click here>>
Going into the close, we saw big selling — all major indexes closed at session lows. However, this would appear to have more to do with portfolio positioning, quarter-end, than with any fundamental bearishness: the Dow dropped -550 points or -1.56%, the S&P 500 was -72 points or -1.57%, the Nasdaq -221 points or -1.54% and the small-cap Russell 2000 was -20 points or -0.95%. The end-quarter shift is further illustrated by the 3-to-1 sells to buys on the day.
It’s the first quarterly loss for the S&P in two years. Yet with the strong surge we’ve seen in the past three weeks — since the Fed raised interest rates a quarter-point — the S&P is somehow just -5% from its all-time highs set in the earliest days of the year. The quarter was shaping up to be quite terrible, but the past few weeks — today’s regular session notwithstanding — brought it back from the brink of despair.
Utilities and Energy were the only two winning sectors for the entire quarter, despite WTI and Brent crude taking a hit during today’s trading. Inflation is very real, at 40-year highs in some respects — just look at this morning’s PCE deflator numbers — and home prices (which lead to higher rents) and higher wage gains are those sticky kinds of inflation that take more time to burn off. A 25 basis-point hike may look like a spit in the ocean to some; if the Fed was concerned with an inverted yield-curve as a reason not to raise by 50 points, it looks like that inversion is here anyway.
On the other hand, employment figures are skyrocketing of late, with yesterday’s JOLTS survey +43.5% year over year. Wages, while adding to overall inflation metrics, are still bringing purchasing power to a wider swath of the American public. And pent-up demand after two years of basic confinement is already proving to be a big driver in the labor market and the Leisure & Hospitality sector. Finally, as Zacks Chief Economist John Blank said yesterday, that based on the past two years’ myriad extraordinary circumstances, “It is very unlikely this yield curve inversion offers a ‘sophisticated’ read thru, like so many quick-draw Twitter pundits offer.”
So there’s some food for thought. Suffice it to say we enter Q2 with robust employment figures expected and room to surge higher on market indexes. We have a Q1 earnings season that has already baked tougher year-over-year comparisons into the cake. In short, there is plenty to look forward to and many reasons to be reasonably cautious already accounted for.
Questions or comments about this article and/or its author? Click here>>
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