U.S. and International Equities
Markets Pull Back
For the second straight week, all major equity markets finished lower. The Russia-Ukraine conflict and its effects on oil prices and thus inflation have added to the previously existing monetary policy uncertainty which continues to give market participants pause.
Energy, which has dominated all S&P 500 Index sector returns year to date, continued to lead all sectors as oil recently reached levels not seen since 2008. Energy prices, the aftermath of economic sanctions levied against Russian companies, along with the strong U.S. dollar drove down international equities across the board this week.
Fixed Income Reverses Course from Week Prior
The Bloomberg Aggregate Bond Index finished lower, reversing course from last week, continuing its trek lower in 2022. This sentiment also carried over to investment-grade credit, as tracked by the Bloomberg Credit Index. High-yield corporate bonds, as tracked by the Bloomberg High Yield index, fared no better as traders continue to weigh the effects of inflation on fixed income in light of next week’s Federal Open Market Committee (FOMC) meeting.
Oil and Natural Gas Lower; Gold and Silver Shine
In what has been a banner year for the commodity so far in 2022, crude oil pulled back over 5% this week on potential diplomatic talks in Ukraine. Natural gas prices pulled back as well. Additionally, gold and silver finished the week higher while copper prices declined.
Economic Weekly Roundup
Headline Inflation Reaches 40-Year High
February’s Consumer Price Index (CPI) growth was reported at almost 8% year over year. This was in line with economists’ expectations; however it was the highest reported since early 1982. Core CPI (excluding food and energy) rose almost 6.5% year over year. Both readings were in line with economists’ expectations. High inflation reflected ongoing supply challenges in the face of continuing strong demand and the increase in energy prices, which started to spike towards the end of the month as concerns over the Russian invasion of Ukraine rose.
Growth Expectations Adjusted
LPL Research expects the U.S. economy to grow 3.7% in 2022, with risks to the downside. The U.S. economy grew over 5.5% in 2021, exhibiting strength after an unprecedented global pandemic. But as the economy marched into 2022, the Omicron variant squelched some of the rebound in economic activity. As this data came out, we saw the need to revise down our forecast for the year. The risks are to the downside since the Federal Reserve (Fed) may err on tightening too fast, the recent commodity spike may trickle down to the U.S. consumer, and supply and demand imbalances may last longer than expected.
Jobless Claims Increase Marginally
Initial claims for unemployment insurance for the week ending March 5 came in above last weeks’ total as well as above economists’ expectations. In addition, continuing claims increased marginally from the prior week and came in above economists’ estimates. This data continues to illustrate a tight labor market that is unlikely to hold back the Fed from focusing on the inflation side of its mandate in 2022.
The following economic data is slated to be released during the week ahead:
- Tuesday: February Producer Price Index (PPI)
- Wednesday: February Export/Import Prices, Retail Sales, January Business Inventories, National Association of Home Builders March Housing Price Index, Federal Open Market Committee (FOMC) meeting concludes
- Thursday: Weekly Initial and Continuing Unemployment Claims, February Housing Starts, Building Permits, Housing Starts; Manufacturing Production
- Friday: February Leading Indicators, Existing Home Sales
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. All market and index data comes from FactSet and MarketWatch.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions.
This Research material was prepared by LPL Financial LLC.
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed
Not Bank/Credit Union Deposits or Obligations | May Lose Value
Tracking # 1-05255478