Markets “In a Nutshell” for May 23, 2022
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 2.90%, the S&P 500 was down 3.00%, and the NASDAQ fell 3.80%. Foreign stocks (MSCI EAFE) were up, rising 1.60%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 2.79%. (Data source: Wall Street Journal)
Markets Continue to Move Lower
Markets once again had a choppy week as inflation, supply chain issues, and the ongoing conflict in Ukraine continue to worry investors. On Wednesday we saw the largest one-day decline since June of 2020 in the S&P 500. On Friday the S&P 500 dipped into a bear market but closed down 18% from its all-time avoiding a close in a bear market. With another down week, we now have seen 7 straight weeks of losses for the market. The Dow Jones has now dropped 8 consecutive weeks making it the longest losing streak since 1923. The market continues to struggle to price in all the news headlines from inflation, war, and recession worries which is causing the recent volatility. Many expect this volatility to continue until we get some more answers on the recent worries for the market.
How Likely is a Recession?
With consumers paying more for everything due to inflation and the Fed having to raise rates and tighten their policy, many wonders if a recession is imminent. With the S&P 500 down 18%, there is currently a 75% chance of a recession priced into the market. However, the economic data does not completely support a recession on the horizon. The consumer is still strong in the United States, there is a tight labor market as unemployment continues to fall and wages continue to rise. Corporate earnings are also continuing to rise, slower than the previous year, but still in the mid-single digits. These recession fears have made equities more attractive when looking at the price to earnings multiple of the S&P 500 as it is now below 20. The last time the multiple was under 20 was in December of 2018 when markets had a similar size decline.
What is the current unemployment rate in the United States? (Scroll Down for Answer)
Have a Great Week!
1. 3.6%, the unemployment rate is back to all-time lows signaling the labor market is tight. Although low unemployment is good for the economy, companies are having to raise wages to try and bring people in to work which is adding to the inflation problems.