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2/10 Market View Weekly: By the Numbers

2/10 Market View Weekly: By the Numbers

February 14, 2023

Rally Stalls

Stocks struggled last week, weighed down by rising bond yields, a firming U.S. dollar, geopolitical tensions, and generally unimpressive corporate earnings reports. Perhaps the most consequential overhang was the potential direction of monetary policy.

Initially, traders were relieved by comments made by Fed Chair Jerome Powell earlier in the week that he had not struck a more aggressive tone following the strong employment report released after the Federal Open Market Committee (FOMC) meeting. The relief was short-lived, however, as anxieties over future monetary policy resurfaced, exacerbated by comments by one Fed governor who suggested restrictive monetary policy would be necessary for a few years to tamp down inflation.

Market Update1

Observations

The Dow Jones was the week’s best performer in a broadly down market environment, declining -0.11% vs. -2.37% for the NASDAQ and -1.07% for the S&P 500.

Small Caps were the laggards on the week, trailing Large Caps, returning -3.34%, being last week’s worst performer.

International stocks underperformed broad domestic stocks, with the MSCI EAFE and MSCI EM returning -1.57% and -2.40% respectively.

Bonds were negative across the board, with the Bloomberg U.S. Agg Bond Index declining -1.43%, while the Bloomberg Global Aggregate Index dropped -1.63%. U.S. High yield credit declined -1.78% on the week.

Streaming Is Saving Our Quality Of Life: The Ludwig Institute for Shared Economic Prosperity has created an index to measure the cost of basic recreational activities, such as eating out, sports equipment, sports at school, tickets to a minor league game, a three-day vacation, and money for gifts, decorations, and holiday dinner. The cost of this bundle of necessities has risen from $2,586 in 2001 to $3,577 in 2021, which is lower than the overall rate of inflation. The cost of the bundle has actually been decreasing since 2013, due to the replacement of cable TV subscriptions with streaming services. The cost of TV has fallen from $746 per year in 2012 to $277 in 2021, which has helped the overall cost of the bundle fall from $3,900 in 2012 to its current level. This suggests that the greatest corporate force in terms of reducing household recreation budgets may be the rotation away from the cable bundle and towards streaming.2

More Than 50 Million Americans to Bet on the Super Bowl: While waiting for official numbers, this year's Super Bowl is expected to have record-breaking levels of gambling, with more than 50 million Americans betting $16 billion. The expected record-breaking game comes as 36 states and the District of Columbia have legalized sports betting. It was also the first National Football League Championship to be played in a state with legalized sports betting. Fans in the stadium were able to place mobile-phone bets during the game. Anheuser-Busch InBev has been the only company allowed to advertise alcohol at the Super Bowl for the past 33 years, but since they gave up their exclusivity deal with the NFL, other beer and spirit companies like Molson Coors, Remy Cointreau joined the big Sunday festivities.3

Reprinted with permission from BTN. Copyright © 2023 Michael A. Higley.

1 Data Obtained from Morningstar as of 2/10/2023
2 LISEP Ludwig Institute for Shared Economic Prosperity
3 More Than 50 Million Americans Are Projected to Bet on the Super Bowl - WSJ

Economic Definitions

Trade Balance: The international trade balance measures the difference between the movement of merchandise trade and/or services leaving a country (exports) and entering the country (imports).

Initial Jobless Claims: Initial unemployment claims track the number of people who have filed jobless claims for the first time during the specified period with the appropriate government labor office. This number represents an inflow of people receiving unemployment benefits.

Continuing Jobless Claims: Continuing claims are the number of people filing for unemployment benefits who have already filed an initial claim. To be included in continuing claims, the person must be covered by unemployment insurance and must be currently receiving benefits. They must have been unemployed for at least a week after filing the initial claim, per Department of Labor (DoL) specifications.

CPI (headline and core): Consumer prices (CPI) are a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate.

Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States of America.

Federal Funds Rates (Fed Funds rate): The Federal funds rate refers to the target interest rate set by the Federal Open Market Committee (FOMC). This target is the rate at which commercial banks borrow and lend their excess reserves to each other overnight.

University of Michigan Consumer Sentiment Index: Consumer confidence tracks sentiment among households or consumers. The results are based on surveys conducted among a random sample of households. Target Audience: representative sample of U.S. households (excluding Alaska and Hawaii). Surveys of Consumers collects data on consumer attitudes and expectations summarized in the Consumer Sentiment, in order to determine the changes in consumers' willingness to buy and to predict their subsequent discretionary expenditures. This Index is comprised of measures of attitudes toward personal finances, general business conditions, and market conditions or prices. Components of the Index of Consumer Sentiment are included in the Leading Indicator Composite Index. Unit: Index (Q1 1966=100)

Retail Sales: Retail sales (also referred to as retail trade) tracks the resale of new and used goods to the general public, for personal or household consumption. This concept is based on the value of goods sold. Conference Board Leading Economic Index: Leading indicators include economic variables that tend to move before changes in the overall economy. These indicators give a sense of the future state of an economy.

Index Definitions

S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.

Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.

MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.

MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

Bloomberg Barclays U.S. Agg Bond: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.

Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.

Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.

Disclosures

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index.

In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Advisor Group Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Advisor Group or its affiliates.

Certain information may be based on information received from sources the Advisor Group Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Advisor Group Research Team only as of the date of this document and are subject to change without notice. Advisor Group has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Advisor Group is not soliciting or recommending any action based on any information in this document.

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