Unacceptably High

Weekly Market Update | July 18, 2022

Highlights

The global equity market struggled to advance last week as investors continued to fret about recession fears. The MSCI World Index slipped 0.9% while the S&P 500 fell by 0.9% and the NADSAQ tumbled 1.6%. Non-U.S. markets also finished the week lower with Japanese stocks retreating 1.5% and European stocks falling 1.7%. Emerging market stocks performed the worst with the MSCI Emerging Market index dipping 3.7%. The 10-year U.S. Treasury yield closed the week 16 basis points lower at 2.92%.

Following the 9.1% consumer price index (CPI) print in July, investors began to consider a 100 basis-point rate hike from the Federal Reserve at the end of July. However, several Fed speakers have suggested that a 75 basis-point rate hike still seems the most likely.

Away from inflation, bank earnings and nominal retail sales suggested that imminent recession fears might be overdone. That said, recession fears are likely to linger heading into 2023. A potential silver lining is that commodity prices, including gasoline prices, have been coming down in July.

Citi’s Global Investment Committee (GIC) decided to de-risk further by bringing down its overweight to oil field services while increasing its weighting to investment grade preferred stock. There was several other smaller portfolio changes as well as the GIC continues to seek out both quality stocks and quality fixed income amid a challenging backdrop.