Market Notebook

Equity prices, as measured by ticker symbol SPY, declined during the last week, while bond prices, as measured by ticker symbol BND, ticked higher.

Equity prices appeared to remain in a technical downward trend while showing possible signs of a transition to consolidation. In reviewing the bear market statistics for both the S&P 500 and the NASDAQ, it appears that growth stocks, as represented by the NASDAQ, will likely lead a future recovery when it occurs. The NASDAQ bear market has already progressed beyond the point where an “average” recovery might begin. The same is not yet true for the S&P 500.

Bond prices appeared to be trading more positively than equities, with the closing price for ticker BND holding above the twenty-day exponential moving average. If economic data suggests that inflation is moderating, one might expect to see bond prices begin to recover. While it is impossible to know whether the June 14th low represents the bottom for BND, it seems that bonds are finally transitioning towards becoming an asset class to accumulate. As a reminder, this is not necessarily true for high yield bonds as credit risk will likely drive prices on concerns about increasing default risk.

For investors looking to purchase equities during the coming week, exercise caution by controlling position size, setting stop-loss orders, or both. Although recent price action has been relatively positive and thus opens the possibility for purchases, one should be on the lookout for further price deterioration should it occur.

Regarding fixed income, the situation is finally looking up for bond investors as the economic backdrop begins to make current bond prices more attractive for buyers.

All the best during the coming week!

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.