Weekly Capital Markets Update

Global equity markets finished higher for the week. In the U.S., the S&P 500 Index closed the week at a level of 4,145, representing an increase of 0.39%, while the Russell Midcap Index moved 1.42% higher last week. Meanwhile, the Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, returned 1.96% over the week. As developed, international equity performance and emerging markets were mixed, returning -0.65% and 0.97%, respectively. Finally, the 10-year U.S. Treasury yield moved higher, closing the week at 2.83%.

As we highlighted last week, the final week of July ended with a bang for markets as participants digested Federal Reserve interest rate hikes, a second consecutive negative GDP quarter reading, and better-than-expected corporate earnings for the second quarter. On the other hand, August is not expected to be as “exciting” of a month for markets as recent months have been. The Federal Reserve will be on break until September 21st, keeping interest rate movements at bay for the time being, and major quarterly data drops being nearly three months away should make for a relatively quiet August. Two areas of importance during August will be new employment and inflation readings that will create speculation around how the Fed may react in September and beyond.

On Friday, the Bureau of Labor Statistics (BLS) reported that nonfarm payrolls rose by 528,000 in July, beating consensus estimates of 258,000. The added jobs pushed the unemployment rate 0.10% lower to 3.5% from the month prior and below expectations of 3.6%. Additionally, wage growth also grew during July, with average hourly earnings jumping 0.5% from the month prior and 5.2% higher than was reported in July 2021. However, with inflation hovering around 9%, the impressive wage growth is still not keeping pace with record inflation levels. Additionally, the labor force participation rate was little changed from the month prior at 62.1% but still below pre-pandemic levels of 63.4%.

While this type of positive news would typically be received positively by the markets, the jobs numbers caused all major indices to open lower last Friday as they signaled economic strength within labor markets and pointed to a greater likelihood of more aggressive rate hikes by the Fed during future meetings this year. Ultimately, the S&P 500 would close the week up, continuing its late July rally. While August is expected to be “quiet” on the data front, markets will continue to move on Fed speculation. Our focus for the month will remain on jobs and inflation prints that will help paint a clearer picture of what may happen in September and during the fourth quarter.

Investors should consider all of the information discussed within this market update and many other factors. However, with so much data and so little time to digest, we encourage investors to work with experienced financial professionals to help process this information to build and manage the asset allocations within their portfolios consistent with their objectives, timeframe, and tolerance for risk.

Best wishes for the week ahead!

Employment Data and underlying chart data were sourced from the Bureau of Labor Statistics on 8/5/22. Equity Market and Fixed Income returns are from JP Morgan as of 8/5/22. Rates and Economic Calendar Data from Bloomberg as of 8/5/22. International developed markets are measured by the MSCI EAFE Index, emerging markets are measured by the MSCI EM Index, and U.S. Large Caps are defined by the S&P 500 Index. Sector performance is measured using the GICS methodology.

Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion and Walsh cannot guarantee the accuracy of said information and cannot be held liable. You cannot invest directly in an index. Diversification can help mitigate the risk and volatility in your portfolio but does not ensure a profit or guarantee against a loss.