Weekly Market Update

After the best week since November 2020, stocks not only held those gains, but added to them with the S&P 500 registering its second back-to-back week of positive returns for the year. There were no clear market catalysts, as beyond prevailing sentiment around the Federal Reserve, Ukraine, and commodity prices, there was a relative vacuum of major headlines and data releases. However, a host of Federal Reserve members made comments throughout the week and expectations for their next policy meeting decision in May have ratcheted up to a 50-basis point (0.5%) hike. As a result, interest rates continue to surge and on Friday the yield on the 10-year US Treasury briefly hit 2.5%, a level not seen since May 2019, while the average 30-year fixed rate mortgage flirted with 5% after entering the year around 3.1% (per Freddie Mac). Clearly financial conditions are tightening, but thus far investors appear to be taking it in stride. Next week will also be relatively quiet in terms of economic data until Friday’s employment and ISM manufacturing reports for March are likely to be scrutinized very heavily.

Resurgence in Travel

In the immediate aftermath of the pandemic, Transportation Security Administration (TSA) traffic declined by over 90% and has been very slow to rebound. Recently, however, as the pandemic recedes and weather warms up, we have seen a notable uptick in travel. For example, on Sunday March 20th, the TSA screened over 2.3M people, the second highest figure since February 2020 and surpassed only by Thanksgiving travel in 2021. As a result, air traffic is now only about 10% below March 2019 levels and over 50% higher than 12 months ago (see chart below). It will be very interesting to see if these encouraging trends persist into the summer as a massive backlog in travel demand will be confronted with the highest inflation in decades.

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