Coming in Hot

Weekly Market Update | May 16, 2022

Highlights

The global equity market slipped for a sixth consecutive week with the MSCI AC World Index falling 2.2%. In the United States, the tech-heavy NASDAQ dropped 2.8% while the S&P 500 closed the week 2.4% lower. Markets overseas experienced similar losses with European stocks tumbling 1.0% and Japanese stocks sliding 2.1%. The nominal 10-year U.S. Treasury yield retreated from recent highs – falling 20-basis-points to 2.92%.

The April consumer price index (or CPI) showed that inflation likely peaked at 8.5% in March. Investors and policymakers were hoping for a faster pace of deceleration, but the decline from 8.5% to 8.3% is still good news and likely the beginning of a lasting trend with inflation possibly falling to about 6.5% by year-end.

Heading into 2023, labor market data may become more important than inflation data with weekly initial jobless claims for unemployment insurance having potentially bottomed in March 2022. While the U.S. labor market remains tight, we wonder if weakening labor market data later in the year may test the Federal Reserve’s resolve to tackle inflation at any cost.