ND&S Weekly Commentary 12.27.22 – Markets Finish Mixed

Equity markets were mixed last week as investors continued to worry about nagging inflation and a possible recession. The S&P 500, Russell 2000 and NASDAQ are all in bear market territory (down 20% or more from peak).

For the week, the DJIA gained 0.86% while the S&P 500 dropped 0.20%. The tech-heavy Nasdaq finished 1.94% lower as tech stocks struggled to move higher. For the week, the MSCI EAFE Index closed up by 0.38% while emerging market equities (MSCI EM) gave back 0.24%. Small company stocks, represented by the Russell 2000, advanced 0.53%. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished lower by 1.47% for the week as yields moved higher. As a result, the 10 YR US Treasury closed at a yield of 3.75% (up 27bps from the previous week’s closing yield of ~3.48%). Gold prices closed at $1,795.90/oz – up 0.33%. Oil prices moved higher to close at $79.56 per barrel, up 7.09% on the week.

Economic news was fairly light last week. Housing starts fell 0.5% m/m. New home sales decreased to 600k (no surprise given higher mortgage rates and talk of a possible recession). Initial unemployment claims climbed to 216k. Surprisingly, consumer confidence increased to 108.3, its first increase in three months and above consensus of 101. Economic releases in the week ahead include: S&P Case-Shiller Home Price Index, December Consumer Confidence, November Pending Home Sales, Weekly Jobless Claims, and the Chicago PMI for December.

Markets will attempt to move higher this week as the Santa Claus rally kicks into high gear. Let’s hope the old saying is proven wrong this year – “If Santa should fail to call, bears may come to Broad and Wall’. Tax loss selling is mostly over and should take away some of the downside pressure that we saw over the past few weeks. We hope to be picking up bargains over weeks and months ahead. Diversification, patience and a bias towards quality will help investors manage through this challenging environment. As such, we continue to suggest that investors stay close to their long-term target asset allocations with a slight defensive bias.

We hope that you have been enjoying the holidays. Stay safe.

“Let us be grateful to the people who make us happy, they are the charming gardeners who make our souls blossom.” – Marcel Proust