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April 4, 2022 - Markets Finish Mixed Amid Geopolitical and Inflation Concerns

| April 05, 2022

Index Performance

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U.S. and International Equities

Markets Finish Mixed

As has been the major market theme since late February, the Russia-Ukraine conflict and its effects on inflation added to this year’s concerns over monetary policy and continued to weigh on investor sentiment. Amid the geopolitical concerns in Eastern Europe, investors added additional risk to emerging market names per the MSCI EM.

Real estate led all sectors this week and has posted an excellent showing over the past month. Amid increasing interest rates, LPL Research has been positive on this sector given the economic reopening, attractive valuations, healthy credit markets, as well as real estate’s ability to weather inflation.

Fixed Income Higher

The Bloomberg Aggregate Bond Index finished higher, reversing its downward trend in 2022. High-yield corporate bonds, as tracked by the Bloomberg High Yield index, also followed suit as traders took a shine to the asset class amid relatively more attractive high yield bond spreads vs. Treasuries.

Commodities Mixed

After ending last week higher, crude oil lost ground this week on the back of demand concerns amid the highly uncertain geopolitical landscape in Eastern Europe and lockdowns in China. WTI crude oil dropped below $100 per barrel this week for the first time since the Russian invasion. In addition, natural gas prices finished higher following last week’s double-digits performance, while the major metals, gold and silver, finished the week lower.

Economic Weekly Roundup

Largest Year-Over-Year Increase for PCE

February’s Personal Consumption Expenditures (PCE) was reported at its highest year-over-year rate since 1983. That being said, the annual reading came in below economist expectations. In addition, core PCE, excluding fuel and food, also came in below economist expectations. Increasing prices put a dent in consumer spending, which increased below economists’ expectations.

Consumer Confidence Increases Amid Inflation

The Conference Board’s March Consumer Confidence reading inched higher from last month’s 12-month low and surpassed economists’ expectations. Presently, consumers are facing the highest inflation readings in 40 years, but given record-low continuing claims and strong job numbers, consumers, for now, appear able to weather the current economic climate.

Initial Claims Higher Than Expected; Continuing Claims Reach Record Low

Initial claims for unemployment insurance for the week ending March 26 came in above last week’s total as well as below economists’ expectations. In addition, continuing claims declined from the prior week, this was below economists’ estimates as well and reached a record low not seen since 1969. The data continues to illustrate a tight labor market that is unlikely to dissuade the Fed from focusing on the inflation side of its mandate in the rest of 2022.

The following economic data is slated to be released during the week ahead:

  • Monday: February Durable and Factory Orders
  • Tuesday: March Total Light Vehicle Sales, PMI Composite, Institute for Supply Management Non-Manufacturing Report, February Trade Balance
  • Wednesday: Federal Open Market Committee March Minutes
  • Thursday: Weekly Initial and Continuing Unemployment Claims, February Consumer Credit
  • Friday: February Wholesale Inventories



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