Market Notebook

by | Sep 11, 2022

Discussion – 

Equity prices, as measured by ticker SPY, closed significantly higher on the week, while bond prices, as measured by ticker BND closed lower near key price support.

Prices for equities and bonds diverged last week, with equity prices posting significant gains while bond prices slumped further toward the June 14th lows. Equities might be characterized as solidly within an area of consolidation. While still technically in consolidation, bond prices are nearing a retest of the June 14th lows. A significant breach of the June 14th lows could mean bond prices have further to fall before the end of the current cycle.

Market participant sentiment regarding equities was unusually positive on the week. The rally appeared to be a momentum rally as negative news flow predominated. Although the rally was welcome and helped to solidify the technical analysis picture, momentum rallies are typically easily undone.

Regarding bonds, it was no surprise that bond prices continued their slide. News flow was predominantly negative, with consensus suggesting a 0.75% rate hike by the Federal Reserve governors at their next meeting.

Regarding the real economy, the status quo continues. Significant inflationary pressures remain in the real economy, and the Federal Reserve continues to act to reign in those pressures. It appears that most market participants believe a Federal Reserve pivot is well into the future.

During the coming week and primarily based on technical analysis, the doors remain open for equity and bond purchases within portfolios should purchases be required. Caution is advised regarding bond purchases as it appears bond prices are likely to retest the June 14th lows.

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.