Market Notebook

Both equity and bond prices moved lower during the last week.

Equity and bond prices appeared to be reacting to economic data releases suggesting inflationary pressures are not moderating. This puts the Federal Reserve in the position of potentially having to hike rates faster and in larger increments. Consequently, the risk to growth increases. Attempting to slow economic growth without stopping growth is a tricky thing. This is especially true when massive stimulus is sloshing around the economy and ongoing global economic dislocations due to pandemic and conflict are not resolved. Unfortunately, this means volatility associated with inflationary concerns could be with us for a while.

From a technical perspective, equities, as measured by ticker SPY, can still be considered in consolidation even after last week’s moves lower. SPY closed the week right at technical support. If this support level breaks during the coming week, one might expect equities to move into bear market territory.

As measured by ticker BND, bond prices lost support during the last week. What was potential price consolidation can again be characterized as a downward trend.

The previous consolidation in equities and bonds opened the possibility of making purchases. Given the new technical picture, it is likely not prudent to make purchases during the coming week except for specific opportunities or if portfolio construction requires them.

As painful as some of these movies have been, they bring future opportunities. There are excellent companies with excellent employees doing excellent work whose share price is now lower than it’s been in quite a while. Those opportunities exist. Long-term investors can take advantage of them.

All the best in the week ahead.

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.