In The Spotlight
In The Spotlight
In The Spotlight
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Despite recent valuation compression, long-term metrics such as the cyclically-adjusted P/E ratio remain elevated for the S&P 500. The potential backdrop of rising rates and decelerating growth may drive further repricing of multiples, though we expect relatively stable earnings to hold valuations higher over the medium-term. We believe companies that prioritize profitability over revenue growth will become more favorable in this higher rate and inflation environment.
The S&P 500 rose 6.46% on the week as Fed Chair Powell’s hawkish Congressional testimony already reflected market expectations. US tech stocks in particular found relief from a slight decline in bond yields. In the UK, the FTSE 100 closed up 2.78% last week, despite the highest inflation print in four decades. In Europe, the STOXX 600 hit another low for the year before rebounding to finish up 2.43%. Read More
Oil prices fell last week as weak economic data in the US and Europe drove demand concerns. WTI and Brent closed last week at $107.62/bbl and $113.12/bbl, respectively. Still, limited refinery capacity has kept gas prices high, with President Biden calling for a three-month federal gas tax holiday. Gold prices fell -0.56% as higher rates may pose a headwind. Read More
Global sovereign yields fell last week as the market took stock of concerns surrounding economic growth. Recession risks have risen again, with Fed Chair Powell acknowledging the challenge of achieving a soft landing in the US. The 2-Year and 10-Year Treasury yields fell to 3.06% and 3.12%, respectively. In Europe, the 10-Year German Bund yield fell -22 bps to 1.44% on the back of weaker-than-expected economic data on the continent. Read More
The US dollar index nudged off of recent highs against a basket of currencies and fell -0.59% as Treasury yields cooled from recent surges. Meanwhile, the Japanese yen moderated recent depreciation, ending last week up 0.19% at 135.24. Still, the yen stands out for weakness this year as JGB yields stay grounded relative to those of other developed markets. Read More
UK CPI rose 9.1% YoY in May, in line with consensus expectations. While goods inflation showed signs of deceleration, rising food price pressures and extended disruptions to energy markets are likely to keep headline inflation elevated. In Japan, prices for food (ex-fresh food) and durable goods continued increasing in May, primarily due to a weaker yen and rising commodity prices. However, the national new core CPI (excl. fresh food and energy) stayed relatively anchored at 0.8% YoY as transport and medical care prices declined from a year ago. Read More
Euro area flash composite PMI decreased by 2.9 pp to 51.9 in June, below consensus expectations. The weakening was broad-based across countries and sectors, with expectations of future output decreasing further amid prolonged price pressures. In the UK, the flash composite PMI remained unchanged at 53.1, surprising expectations to the upside, as employment, backlogs, and new export orders edged up despite falling new orders. Read More
US Initial jobless claims decreased to 229k for the week ended June 18, lower than the prior week’s upwardly revised total of 231k. The print was in line with consensus expectations. The four-week moving average, used to smooth out weekly fluctuations, rose from 219k to 224k. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
Japan Retail Sales, Year-over-Year (Cons: 4.0%, Prior: 2.9%)
Euro area M3 Money Supply YoY (Cons: 5.8%, Prior: 6.0%)
US Initial Jobless Claims (Cons: 230k, Prior: 229k)
US Core PCE YoY (Cons: 4.8%, Prior: 4.9%)
Euro area Unemployment Rate (Cons: 6.8%, Prior: 6.8%)
US ISM Manufacturing (Cons: 54.7, Prior: 56.1)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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