Market Notebook

by | May 29, 2022

Discussion – 

Both equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND, rose during the last week.

Favorable price action, as was seen last week, is a positive development for equity prices generally. The sharp recovery in equity prices appears related to the idea that the recent acceleration in inflation is moderating. Additionally, price action suggests the presence of a Fear Of Missing Out or FOMO momentum factor.

From a technical analysis standpoint, the recovery puts into play the possibility that equity prices could be entering consolidation, which would be welcome. Even though equity prices had a strong week, one should note that SPY closed the week at an area of potential resistance. Furthermore, there are additional areas of potential resistance around the SPY price levels of $420 and again at $430. The closely spaced areas of resistance could make for a choppy week of trading next week.

Regarding bond prices, they appear to be in consolidation. This is good news. If bond prices are consolidating, market participants likely believe inflation is becoming less of a concern. If true, this dynamic sets the stage for equity price gains and an opportunity to resume limited bond purchases within portfolios.

Overall, last week was a feel-good week, with price action potentially opening the door for opportunistic purchases in both equities and bonds during the coming week. What last week was not was a signal that all is clear. While correctly sized, opportunistic investments are potentially warranted, wholesale reinvestment of money on the sidelines is likely not prudent just yet.

Wishing you 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.