Keeping and Eye on Inflation

Weekly Market Update | May 9, 2022

Highlights

The global equity market remained volatile last week with the MSCI AC World Index falling for a fifth consecutive week (down 1.5% on the week). In the United States, equity markets were whipsawed on Wednesday and Thursday, but the Dow Jones and the S&P 500 both closed the week just 0.2% lower. The NASDAQ continued to correct – slipping 1.5%. Markets overseas were not spared with European and Japanese stocks each down 4.1%. The nominal 10-year U.S. Treasury yield continued to climb higher – rising 19-basis- points – as the Federal Reserve moved forward with tightening monetary policy.

The April consumer price index (or CPI) is expected to show U.S. inflation trending lower. This could be welcomed news, but the details of the report will be key as investors digest whether it is largely a machinal move lower or part of a more substantial trend. President Biden has already announced that he will address the nation following the release of the report. We do not envision the report deterring the Federal Reserve from hiking rates at their next couple of meetings.

We would remind investors that bear markets are often followed by substantial and lengthy stock market recoveries.