Market Notebook

by | May 1, 2022

Discussion – 

During the last week, both U.S. equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND closed lower.

From a technical perspective, SPY ended the week right at the supposed February 24th price support levels. Because SPY appears to be holding above the February 24th lows, SPY could be considered in consolidation. The best possible outcome during the coming week would be a bounce from Friday’s close with SPY remaining above the February 24th lows. Unfortunately, the price action that got us to this point appeared weak. It would not be surprising if support levels were breached and SPY moves lower in the coming week.

Regarding bond prices, they appear to be in a continuing downward trend. No technical signals nor fundamental stories suggest bond prices might halt their downward slide. The most positive research from last week published by the Dallas Federal Reserve suggested that the upward acceleration in the Trimmed Mean PCE, which is a decent representation of core inflation, has slowed its rise over the short term.

From a portfolio construction standpoint, balanced portfolios have had a rough time as of late. Balanced portfolios are ideally constructed with low-correlation components. The two key components being equities and bonds. Periods when equity and bond prices are declining at the same time are challenging periods for many investors to endure. It is particularly important for holders of balanced portfolios to have faith in the balanced portfolio concept.

For those seeking buying opportunities in equities during the coming week, it may be possible to grab some deals if one believes that the current support level in SPY will hold. If purchasing equities, exercise extreme caution. Stop orders and conservative position sizing are likely to be your friends given the level of uncertainty.

Bond prices appear to be in an established downward trend, and it seems prudent to avoid bond purchases unless necessary.

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.