Market Commentary — May 2, 2022
The S&P 500 Index of U.S. large-cap stocks fell to its lowest level in 2022. Despite strong earnings from bellwethers such as Apple, Microsoft, and Meta Platforms, Amazon’s earnings disappointed, posting its first quarterly loss since 2015 and sending its shares down 14%.
Overall, earnings season has been a mixed bag with many companies issuing cautious guidance due to rising input prices and/or supply chain concerns. Geopolitical and macroeconomic concerns have also weighed on investor sentiment. The biggest economic data surprise was the Commerce Dept’s estimate showing the U.S. economy contracted 1.4% in Q1 2022 due to falling inventory investment and a record trade deficit. On the positive side, consumer spending (+2.7%) and business investment (+7.3%) suggest it is too early to say the data is signaling a recession.
Other economic reports indicated continued expansion and taming inflation. Core capital goods orders (excluding defense and aircraft) rose 1.0% in March, double the consensus expectations, and personal spending rose 1.1%, beating expectations for an increase of 0.7%. Inflation data was also encouraging, as the YOY increase in the core personal consumption expenditures (PCE) price index, the Fed’s favorite inflation gauge fell to 5.2% in March for its first drop in over a year.
With the release of March’s CPI Series US Treasury I saving bonds yielding 9.6% will be available as of May 2 becoming the hottest ticket in town. The previous rate was pretty hot too at 7.12%. To take advantage, all you need to do is open an account at TreasuryDirect.gov which takes about 10 minutes. You can only buy $10k per person and you have to hold them for at least a year, but most would be willing to lock in that rate for a while!
Enough boring investing talk, what’s happening in ETF land? Chinese ETFs soared on the news that Beijing plans to ease big tech crackdowns to help its suffering economy. BlackRock launched a Blockchain ETF that will not hold crypto assets. A little late to the party, as BLOK launched in January of 2018, but they believe “the broader opportunity – leveraging blockchain for payments, contracts, and consumption- has not yet been priced in. I would agree with that! Fidelity is also boosting its thematic line-up with a Crypto Industry & Digital Payments and Metaverse ETF. Invesco launched a K-1 free Electric Vehicle Metals Commodity ETF, a good complement to BATT which invests on the equity side for these metals. And finally, the anti-ARK, anti-Cathie Wood bashing continues as their ETFs trimmed Tesla and topped up Teledoc. I refuse to pile on and am still team Cathie.
Here’s to calmer markets and world peace. As Nelson Mandela once said, “It always seems impossible until it is done.”
CEO and Co-Founder