Market Highlights

Economic

• March consumer confidence fell to 107.2, as inflation and a rising rate environment hit Economy
• Retail sales rose 0.2% in March, with auto sales down to 13.4 million units, below estimates
• Non-farm payrolls in March decreased to 431,000, below estimates of 490,000
• Unemployment fell to 3.6%, with underemployment falling to 6.9%
• U.S. industrial production rose 0.9%, following a rise of 0.5% in February
• Housing prices rose 15% on a year-over-year basis, with an increase in supply to 6.4 months
• New home construction numbers were 1.79 million in March, up slightly
• Existing home sales were down at 5.7 million in March, as mortgage rate rose over 5%
• U.S. manufacturing expansion is slowing, with March ISM at 57.1, below estimates
• Personal income was up 0.5% and consumer spending was down 0.2% in February
• GDP was up 5.7% in 2021, with strong demand, and should grow 2% 2022

Inflation

• March core inflation was 8.5% for CPI and 11.2% for PPI on a year-over-year basis
• Crude oil rose to $123 and has settled back to $99 as the war in Ukraine enters its 3rd month
• Inflation is moving higher with increases in wages, rents, foods, and goods

Monetary Policy

• The Fed increased the Fed Funds rate to 0.25% and the Discount rate to 0.5%
• The Fed may raise rates by 50 basis points at the May and June meetings
• The Fed may raise rates at least 5 to 8 times to tame inflation and reduce liquidity

International

• Putin invades Ukraine at a heavy price and a big miscalculation
• Finland and Sweden are ready to join NATO after Russia's invasion
• China has more lock downs as COVID variant spreads
• The war may cause a huge jump in wheat prices across the globe

Interest Rates

• Ten-year Treasury yields rose from 1.77% to 2.93% and now stand at 2.8%
• Libor, the inter-bank lending standard, is 1.21%, and is set to be phased out later this year
• Mortgage rates rose, as the 30-year fixed rate increased to 5.2%
• Yields on international debt have turned positive as rates and inflation rise

Earnings

• Reported corporate earnings are beating estimates 79% of the time and revenues are beating 69%
• 2022 earnings are projected to grow 9% as travel comes back with COVID receding
• Markets may slow as Fed tries to slow inflation with a soft landing

Market Outlook

• S&P 500 was down -4.6% for the first quarter as tech heavy Nasdaq hit bear market -20%
• Market volatility increased as the Fed tries to regain credibility
• Energy, Utilities, and Consumer Staples were the best performing groups
• The S&P 500 is trading at 19.5 times forward earnings, above its 25-year average

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