PAS Weekly Commentary

Third Straight Losing Week for S&P 500 and a Fourth for the Dow

The S&P 500 dropped 2.8% this week, unable to get past concerns about rising rates and the Fed's hawkish mindset.

The Nasdaq Composite (‐3.8%) and Russell 2000 (‐3.2%) underperformed the benchmark index with losses over 3.0% while the Dow Jones Industrial Average fell 1.9%.

It was reported last week that bullish sentiment among individual investors recently hit a 30‐year low, setting the stage for a contrarian‐minded rally this week. The rally took place on Tuesday, and briefly continued on Thursday, before a bearish sentiment took hold of the market.

Nine of the 11 S&P 500 sectors closed lower with the worst performers being the communication services (‐7.7%), energy (‐4.6%), and materials (‐3.7%) sectors. The defensive‐oriented real estate (+1.2%) and consumer staples (+0.4%) sectors ended the week in positive territory.

The market had done a good job fending off the Netflix (NFLX) disappointment in which NFLX tanked 35% the day after reporting a decline in subscribers. Earnings reports, after all, were mostly better than expected, and they were from a diversified batch of companies, including Tesla (TSLA) and seven Dow components.

The problem this week was mainly threefold: 1) the 10‐yr yield rapidly approached 3.00%, hitting 2.97% before ending the week eight basis points higher at 2.91%, 2) Fed Chair Powell wasn't ready to declare peak inflation and said the Fed could move to a tight policy after reaching a neutral rate, and 3) weakening technical factors.

On the latter, the S&P 500 couldn't stay above its 200‐day moving average (4497) and fell back below its descending 50‐day moving average (4407).

A few more notes on the Fed, it didn't help that Chicago Fed President Evans, who is one of the move dovish Fed members and was supposed to be a FOMC voter next year, announced plans to retire in early 2023. In addition, St. Louis Fed President Bullard (FOMC voter) said the fed funds rate should be at 3.50% by the year‐end.

The 2‐yr yield, which is sensitive to expectations for the fed funds rate, climbed 27 basis points to 2.72%.

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

2022- 137243 (Exp. 07/22)