Market Notebook

PRICE ACTION:
Equity prices, as measured by the ticker SPY, closed higher while bond prices, as measured by the ticker BND, also closed higher over the last week.

SPY     +3.43%
BND     +0.99%

TECHNICAL ANALYSIS:
US equities staged a relief rally, with the S&P 500 snapping a five-week losing streak.  SPY price remains in a downtrend on a longer-term basis and continues to trade below its 200-day simple moving average, but the week’s bounce represents a meaningful short-term improvement in price action. Whether this marks the beginning of a sustained recovery or simply a pause within the broader downtrend remains to be seen.

BND price appears to be attempting to stabilize after several weeks of pressure, though it too remains in a longer-term downtrend from the highs reached earlier in the year.

SENTIMENT:
Price action suggests a cautious improvement in market sentiment, driven primarily by optimism that the conflict with Iran may be approaching a resolution. Early-week comments from President Trump helped fuel market hopes that an off-ramp from the conflict could be developing, with Trump indicating the U.S. and Iran were engaged in serious discussions and suggesting the war could be over in two to three weeks.  That optimism was not without volatility, however. Trump’s late-night address on Thursday offered no new details on timelines to end the conflict or concrete plans on the unblocking of the Strait of Hormuz, sending stocks sharply lower at the open before recovering.  Markets remain headline-driven and fragile beneath the surface.

ECONOMY AND FUNDAMENTALS:
US economic data releases signaled continued resilience, with manufacturing and retail sales data coming in better than expected.  The standout data point of the week was Friday’s March employment report. Non-farm payrolls increased by 178,000 in March, a marked reversal from February’s 133,000 drop, and came in well above market expectations for a 60,000 gain.  The unemployment rate edged down to 4.3%. Because the stock market was closed Friday for the Good Friday holiday, the market’s full reaction to the jobs number will be reflected in Monday’s trading session. The report is likely to support the Federal Reserve’s patient stance, even as forward-looking growth and inflation risks continue to linger.
 
Estimates of outsized month- and quarter-end institutional rebalancing flows likely amplified the relief rally this week,  as portfolio managers repositioned heading into the second quarter. Oil prices remained elevated throughout the week, and the Strait of Hormuz continues to be a source of disruption and uncertainty. The Federal Reserve’s next meeting is in May, and with a strong jobs report in hand and inflation still running above its 2% target, the central bank appears in no hurry to adjust policy in either direction. The economy, at least by the data in hand, remains on solid footing \[LongDash] though the forward picture is increasingly complicated by the ongoing energy shock and geopolitical uncertainty.

All the best during 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.