Market Notebook

PRICE ACTION:
Equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND, closed lower on the week.

TECHNICAL ANALYSIS:
From a technical standpoint, SPY prices appear to have entered consolidation, while BND prices may have begun a downward trend.

SENTIMENT:
Market participants appear to be concerned about corporate profits and the specter of continued, sticky inflation over the near term.

ECONOMY AND FUNDAMENTALS:
Economic indicators within the Market Notebook remain mixed. Real economic activity will likely slow over the next few months as the Federal Reserve continues to act to contain inflationary pressures.

NEXT WEEK:
The picture for equities remains mixed. Specific opportunities likely exist, but it seems hard to be an enthusiastic buyer, given recent economic data.

One possible defensive play would be to overweight bonds as prices decline and yields improve. Until proven wrong, it seems likely that October 2022 bond price lows represent the cycle lows. Pullbacks in bond prices may represent buying opportunities providing one receives adequate yield. 

The above is not likely true for high-yield bonds. High-yield bond default rates could increase if the economy continues to slow and rates remain high.

Regarding overall strategy, taking a defensive posture and overweighting bonds is likely only valid if one believes a significant pullback in equities is likely over the near term.

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.