Weekly Market Update

Despite fears around the banking system giving “March Madness” a new meaning, stocks and bonds traded higher on the week as expectations of another rate hike from the Federal Reserve fell dramatically.  Over the weekend, SVB Financials’ failure was followed by another bank closure, as crypto-focused Signature Bank was similarly shuttered, and regulators implemented several backstops on Monday to shore up investor confidence and stem a flight of deposits from beleaguered regional banks.  Concerns around the financial system were further exacerbated on Wednesday when headlines of liquidity issues for Swiss Bank Credit Suisse emerged.  As a result, market volatility surged significantly, and we saw particularly wild swings in interest rates.  However, while recent headlines around the global financial system have justifiably dominated markets and are something we will continue to watch very closely, we wanted to take a moment to highlight that data this week was quietly rather disinflationary.

You probably wouldn’t know if from watching financial media recently, but this week was chock full of important data headlined by the consumer price index (CPI), producer price index (PPI), retail sales, and consumer sentiment.  Of those four data points only CPI came in as expected, while the PPI missed significantly (4.6% year-over-year vs. 5.4% consensus), retail sales fell more than anticipated, and consumer sentiment showed the lowest one-year inflation expectations since April 2021.  Furthermore, oil prices this week have fallen below $70 a barrel for the first time since December 2021, so disinflationary data is mounting.  As a result, investors head into next week’s crucial Fed meeting announcements on Wednesday with renewed evidence of inflation decelerating, but also increasing odds of a hard economic landing as we continue to get intermittent headlines of strain in the financial system.  We are closely watching for news over the weekend and investors should be prepared for volatility next week as markets digest the Fed’s decisions and banking headlines. 

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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