Market Notebook

by | Jul 10, 2022

Discussion – 

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

As measured by ticker SPY, equity prices closed above the 20-day exponential moving average. While this is a welcome development, recent price action looks more like a bear market rally than an enduring transition to consolidation or an upward trend. Nonetheless, it was a positive week for the bulls.

Bond prices, as measured by ticker BND, gave back some gains last week. As opposed to equities, bonds do appear to be entering an area of potential price consolidation.

From an economic standpoint, it appears that Federal Reserve policy is having an effect. The obvious question is, “Can the Federal Reserve slow the economy without pushing it into recession while at the same time containing inflation?” In some respects, this question is moot. The Federal Reserve wants the economy to slow and will likely get what it wants. The critical question is, how much will the economy slow, regardless of whether it enters a technical recession. This appears to depend on how quickly Federal Reserve actions bring inflationary pressures under control.

Regarding equity and bond prices, it will be the expectation by market participants of a change in policy that is likely to change price trends. Be mindful that market participant expectations will likely change well in advance of policy changes by the federal reserve, and thus so will market prices. Consider planning for what comes next, not what is happening now.

Regarding the coming week, recent price action in both equities and bonds opens the possibility of purchases within portfolios. Unless prices deteriorate below recent lows, this will continue to be the case.

As a technical note, the methodology for ranking value factor candidate stocks has been changed. The change is meant to better align stocks in the list with the intended output. Additionally, two columns of descriptive data were added to the output and two columns of descriptive data were deprecated.

Wishing you 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.