Market Pulse

In focus

The S&P 500 clocked its third straight week of gains, following a sell-off earlier in the month caused by escalating banking concerns. Since then, the index has recaptured the lost ground, closing out the month of March up 3.5% and inching above 4,100 for the first time since February 15.

Digging beneath the surface of the market cap weighted S&P 500 shows that the performance in March was not broad-based, but rather concentrated among mega cap technology and communications companies following a dovish shift in terminal rate market expectations. The five largest companies in the index, which includes Apple, Microsoft, Alphabet, Amazon, and NVIDIA, contributed to over 75% of the gains last month. While the remaining 498 companies in the index still ended the month positively, four of the 11 sectors ended in the red and financials were down by nearly 10%. The S&P 500 Equal Weighted Index, which gives the same weighting to each company, was down close to 1% over the same period. The S&P Small Cap and S&P Mid Cap indices also closed well into the red.

The recent performance of popular market indices seemingly has been a positive sign, though weakness is still evident beneath the surface. In our view, market resiliency is less than meets the eye as macro risks grow and is why we remain defensive. 

A look back

• Global equities were solidly in positive territory last week with international developed equity markets leading the move higher.
• Last week saw the yields for 2- and 10-year Treasuries rise, with a greater move from the short end, further inverting the curve.
• The Federal Reserve’s (Fed) preferred inflation gauge, Personal Consumption Expenditures, came in below expectations for February – supporting the notion that the Fed’s actions to combat inflation are working.

A look ahead

• With a shortened trading week from the stock market’s closure on Good Friday, investors will focus on company shareholder events before earnings season kicks off.
• Fed Governor Lisa Cook will speak at the University of Michigan on the economic outlook and monetary policy in the U.S.
• Economic releases: ISM & S&P Global U.S. Manufacturing & Services, Factory & Durable Goods Orders, Nonfarm Payrolls, and the Unemployment Rate.

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