Fast and Furious

Weekly Market Update | May 2, 2022

Highlights

The global stock market rout continued last week with the MSCI AC World Index falling 2.7% (it is down 13.4% year-to-date). In the United States, the S&P 500 tumbled 3.3% while the NASDAQ shed 3.9% on weaker-than-expected technology company earnings. Markets overseas were not spared with European stocks declining 2.6% and Japanese stocks slipping 1.4%. The nominal 10-year U.S. Treasury yield was little changed at 2.93% while the real 10-year U.S. Treasury yield turned positive at 0.1%. The recent sharp rise in the real 10-year U.S. Treasury yield has likely been a contributing factor to the dramatic sell-off in technology shares.

The Federal Reserve’s anticipated “fast and furious” monetary policy tightening cycle has upended financial markets with both stocks and bonds suffering losses year-to-date as investors weigh the prospects of a “hard landing” for the U.S. economy. Other headwinds like the ongoing conflict between Russia and Ukraine complicate matters further.

Rising uncertainty may be weighing on financial markets, but that does not mean that investors cannot have asset class convictions. In this short commentary, we provide a brief summary of how we think the economic outlook may unfold and the asset classes that we feel may be appropriate in the current environment.