Weekly Market Report: December 12, 2022

The beginnings of holiday season liquidity, a light economic calendar, and most eyes on this week’s FOMC meeting left little for markets to latch onto last week. Global equity markets walked back some October/November gains with the S&P 500 (-3.4%), developed international (-1.2%), and emerging international (-1.3%) all losing ground. Interest rates edged slightly higher for the week with both 2yr/10yr and 3mo/10yr slopes at multi-decade inversion levels. Commodity markets gapped lower on the back of falling crude oil prices driven primarily by demand concerns given the global economic growth trajectory and China’s tenuous economic/Covid situation.

Market Anecdotes

  • With markets looking for rate cuts sometime in 2023, an Arbor Data Science chart of historical Fed tightening cycles shines an interesting light on the scale and duration of the current cycle.
  • This week’s FOMC meeting will shed light on interest rate policy and economic projections which, in turn, will ultimately be guided by a wide range of metrics including inflation data, survey results, and market inflation pricing indications.

  • A little bounce in bond markets over the past month of approximately 5% still has bond investors sitting deeply in the red and now at a record 28 months without a new bond index high.

  • MRB made note that the recent bond market rally has coincided with an ‘endorsement’ from a credit spread perspective with U.S. Euro, and emerging market spreads all tightening in sync.

  • Both the 10y3m and 10y2y curves touched their deepest inversions since 1981, with only one day exception on the 10y3m – September 12, 2001.

  • A look at a chart of the S&P 500 reinforces the notion that we remain clearly in a down trending market with a need to break through resistance to establish a new leg higher.

  • Goldman Sachs published an interesting look at the top heavy and valuation premium nature of the larger names in the S&P 500 suggesting the concentration factor has further to fall but valuation premium has largely been re-priced away.

  • Holdings data from Goldman also revealed similarities (industrials, healthcare, materials) and differences (financials) between hedge fund and mutual fund complexes.

Economic Release Highlights

  • The November ISM Services index registered 56.5, higher than the consensus estimate (53.5) and above the high end of the range (51.5-56.0)
  • UofM Consumer Sentiment for December registered 59.1, above the consensus estimate of 56.8 and toward the high end of the range (54.0-60.5).
  • JP Morgan Global Composite (48.0) and Services (48.1) PMIs decreased sequentially over prior month levels.


    This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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