Are We There Yet?

Weekly Market Update | May 24, 2022


The global equity market slid for a seventh consecutive week with the MSCI AC World Index falling 1.2%. In the United States, the tech-heavy NASDAQ dropped 3.8% while the S&P 500 closed the week 3.1% lower. Markets overseas performed better with European stocks climbing 0.9% and Japanese stocks rising 1.19%. Emerging market stocks jumped 3.1% as the MSCI China index surged 4.5%. The nominal 10-year U.S. Treasury yield continued to retreat – falling another 13-basis-points to 2.78%.

U.S. stocks are pricing in a future slowing in the economy. This is not surprising given that the Federal Reserve is literally telling investors that it intends to slow the economy in order to combat inflation. The well-used motto, “Don’t Fight the Fed” seems an apt description…particularly when it is still punching (tightening monetary policy).

However, we feel confident that much of this drawdown is likely behind us. Excluding the Tech Bubble and Global Financial Crisis, past S&P 500 drawdowns around periods of U.S. recessions have been around 24.0%. Traditional signs of capitulation have yet to be reached, but financial markets appear to be getting ever closer.

The next Weekly Market Update will be published June 6, 2022. We hope everyone enjoys their Memorial Day holiday!