Market Pulse

Market Pulse

May 2, 2022

In focus

Global markets traded lower last week, bringing the S&P 500’s April return to -8.7%, the worst month since March 2020. Volatility has been the story as markets continue to deal with multiple cross currents.

  • Real U.S. economic growth clocked in at -1.4% annualized for the first quarter of 2022. This number underperformed the consensus estimate of 1.0% for a quarter that faced challenges from winter storms, a lingering omicron variant, and the invasion of Ukraine by Russia. It’s important to note, however, that growth on a non-inflation adjusted (nominal) basis was still strong (+6.5%) despite these headwinds. Consumer and business spending were bright spots and both are key facets of a healthy economy.

  • All eyes will be on the Federal Reserve’s (Fed) FOMC meeting this week. The Fed hiked rates for the first time since 2018 at their March meeting and markets are pricing in a 50 basis point (0.50%) rate hike at this upcoming meeting. Investors will be focused on the post-meeting press conference, where the press will attempt to pry additional details on the Fed’s balance sheet run-off program from Fed Chair Powell.

  • Earnings season has been in focus for investors given that earnings have been a bright spot for markets. This year’s market decline has been entirely driven by valuation contraction, while forward earnings estimates are up 5.7% year to date. Meanwhile, the forward price-to-earnings ratio for the S&P 500 is at its lowest level since April 2020.

A look back

  • Global stocks fell on the week and were led lower by the S&P 500, which fell 3.3%. International developed (-2.2%) and emerging market (+0.1%) equities fared better.

  • Yields ended the week slightly lower but saw a lot of intra-week volatility. The 10-year Treasury yield ended the week at 2.89%.

  • Q1 real gross domestic product (GDP) growth came in at -1.4% on an annualized basis, missing the consensus expectation for a 1.0% increase. Inflation, inventories, and imports weighed on growth.

A look ahead

  • All eyes will be on the Federal Open Market Committee’s (FOMC) rate decision on Wednesday. Investors will be focused on Fed Chair Powell’s post-meeting press conference for hints about the future path of rate hikes and quantitative tightening.

  • Corporate earnings season will continue as investors pay close attention to profit margins and forward guidance in the face of higher input costs.

  • Economic releases: FOMC rate decision, Factory Orders, S&P Global & ISM Manufacturing, and the Unemployment Rate.

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