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Weekly Market Recap

Stocks staged a strong rebound last week that was only briefly interrupted (for about an hour) by the start of the Fed’s rate hiking cycle. Most US benchmarks were up at least 5%, while an even sharper rally in growth stocks pushed the Nasdaq higher by more than 8%. Only the energy sector failed to deliver positive returns. International stocks also finished higher, with Chinese equities staging a dramatic reversal after authorities pledged to support a rapidly falling market.

Treasury yields moved higher leading up to the FOMC’s well-telegraphed Fed Funds rate decision. By week’s end, futures markets were pricing in a total of seven additional 25bp hikes by the end of the year, implying a Fed Funds target rate floor of 2.0%. Meanwhile, credit spreads moved tighter as equities rallied, driving small price gains in corporate bonds despite the move higher in rates.

Commodity prices finished lower for the second straight week on volatile day-by-day moves. Oil fell nearly $15/barrel through Wednesday’s close before rebounding sharply later in the week on renewed fears of tight supplies. Nonenergy commodities followed a similar pattern.

Economic data continued to point to a strong economy and high inflation last week. Residential housing starts and new building permits were very strong, unemployment claims remained low, and the Conference Board’s Leading Economic Index (LEI) gained 0.3% in February despite the invasion. Meanwhile, various indicators of inflation remained in the double digits on a y/y basis, including PPI (+10.0%), import prices (+10.9%), and export prices (+16.6%).

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Weekly Market Recap

Most US stocks were lower again last week as the Russian war in Ukraine ground on. Once again, energy was the only sector in the S&P 500 to finish higher on the week. Interestingly, European stocks fared somewhat better in the latter half of last week, rebounding significantly after reaching YTD lows on Tuesday. Emerging market benchmarks were dragged lower by weakness in Chinese equities, which closed at 4+ year lows on Friday.

The selloff in bonds continued as investors lost hope that a silver lining of the war in Ukraine might be a less hawkish Fed. 2y Treasury yields rose 27bp, 10y yield gained 26bp to a fresh pandemic high of 1.99%, and 30y yields rose 19bp. After expectations for 2022 rate hikes fell in the days following the invasion, Fed Funds Futures markets are now pricing in a total of seven 25bp hikes by year end. See the Chart of the Week for a time series of 2022 rate hike expectations.

Last week brought some welcome relief in commodity prices, particularly oil which eased lower despite a US ban on Russian oil imports.

In economic news, the University of Michigan consumer sentiment gauge weakened in preliminary March data, with 1y forward inflation expectations rising to +5.4% while longer term (5-10y) expectations remains anchored at +3.0%.

Meanwhile, CPI data showed strong price gains in February:

* Headline CPI rose 0.8% sequentially to reach +7.9% y/y

* Core CPI (ex food and energy) rose 0.5% sequentially to +6.4% y/y

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Weekly Market Recap

Stocks were lower last week as the Russian war in Ukraine intensified. European stocks were hit especially hard, sending MSCI’s EAFE developed market international index down 6.5% on the week. In the US, investors scrambled to increase their exposure to energy stocks and defensive sectors, while selling tech and most cyclicals besides energy.


Bond markets reflected the sharp increase in risk aversion, with Treasury yields falling across the curve while credit spreads widened. The belly of the curve saw the most dramatic move, with 10y yields falling 23bp on the week, 2y yields finishing lower by 9bp, and 30y yields falling 11bp. Meanwhile, investment grade credit spreads moved wider by 9bp to reach 122bp, while high yields spreads were 23bp wider on the week, finishing at 376bp. See the Chart of the Day for a time series of credit spreads.


Commodity prices moved sharply higher last week. WTI finished above $115/barrel for the first time since September of 2008 (oil spiked briefly in the immediate aftermath of “Lehman weekend”), while the S&P GSCI Non-Energy Commodity Index closed at a new all-time high on Friday.
In economic news, nonfarm payrolls (+678k) significantly exceeded consensus expectations, while the unemployment rate fell to 3.8%. In a sign that inflation pressures may be abating slightly (at least prior to any economic fallout from the war in Ukraine), average hourly earnings were flat sequentially in February and fell to +5.1% y/y.

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Weekly Market Recap

US large caps moved lower last week in the wake of higher-than-expected inflation data, with tech and other growth sectors underperforming while cyclicals (especially energy) held up better. Small and midcap benchmarks managed to finish the week in the green, as did international stocks.

Rates continued to move higher last week, particularly in the front end of the curve as 2y yields rose 19bp while 10y and 30y yields were up just 3bp. Investors recalibrated their bets regarding the forward path of Fed policy, with the chance of a 50bp hike at the upcoming March FOMC meeting rising from ~30% pre-CPI print to roughly 60% afterwards. By the end of the week, investors were pricing in between six and seven 25bp hikes by year-end.

Commodity prices edged higher last week, with oil surging on Friday as the
situation in Ukraine began to look increasingly tenuous. West Texas Intermediate finished the week at $93.10/barrel, its highest level since September of 2014.

Economic data was mixed last week. CPI rose +0.6% sequentially which was above consensus expectations, as core CPI reached +6.0% y/y while headline CPI printed at +7.5%. Initial jobless claims fell for the 3rd consecutive week as the omicron-driven uptick continued to fade. And finally, the University of Michigan Consumer Sentiment index came in much lower than expected in the preliminary February reading, as the current conditions component fell nearly 5 points while future expectations were down nearly 7 points. Encouragingly though, long term (5-10y) inflation expectations were unchanged from January at +3.1%.

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Weekly Market Recap

Financial markets went into full risk-off mode last week, with equities moving lower, the Treasury yield curve flattening, credit spreads widening, and the dollar stronger. An uptick in jobless claims suggests that omicron is having an impact on demand, while investors continue to grapple with the hard pivot in Fed policy.

US large caps were down 5-7% on average, with small caps down even more sharply. Defensive sectors held up the best, along with energy stocks which were once again buoyed by rising oil prices. International equity markets fared better as they generally have so far in 2022, registering smaller losses.

Treasuries saw strong demand in the belly and long end of the curve as 10y and 30y yields fell by 2bp and 5bp, respectively. 2y yields finished slightly higher on the week, but fell 6bp in the last two sessions after peaking at 1.06% on Wednesday. Meanwhile, credit spreads widened modestly in investment grade markets and more significantly in high yield, echoing the move lower in equities.

Oil prices were also higher last week, although they too peaked on Wednesday before being pulled lower by the increase in risk aversion on Thursday & Friday.

While the uptick in jobless claims was not encouraging, other economic indicators were strong. Housing starts and residential building permits rose in fresh December data, the Philly Fed Business Outlook survey registered strong gains in the January print, and the Conference Boards Leading Economic Index (LEI) rose 0.8% in December, the 10th consecutive month of solid gains.

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Weekly Market Recap

In a move that echoed the early days of 2021, markets got off to a rough start during the first week of 2022 as rising bond yields pushed discount rates higher for all risk assets.


The release of the December FOMC minutes provided a clearer window into the Fed’s current thinking on inflation risks, and investors responded by pushing yields higher across the curve: 2y yields rose 13bp to 0.86% (a fresh pandemic high), 10y yields rose 25bp to 1.76% (also a new pandemic high), and 30y yields rose 22bp to 2.12% (still well off last year’s high of 2.40%). See the Chart of the Week for a time series of 2y Treasuries.


Credit spreads were mostly stable last week, pushing the price declines in
Treasuries through to corporate and municipal bonds as well.


In US equity markets, long-dated tech and other secular growth stocks were hit the hardest, sending the Nasdaq down 4.5% on the week. Cyclicals fared much better, with the energy sector posting a +10.6% total return, resulting in smaller declines for the S&P and especially the Dow. Small caps and international stocks also finished lower on the week.


Oil prices rose thanks to supply disruptions related to events in Libya and
Kazakhstan. OPEC+ announced an agreement to increase output that was in line with expectations.

This audio version of the Weekly Market Recap can be found in your favorite podcasting app. Search for “Albion Financial Group” and subscribe!
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Year-End 2021 Market Recap

SARS-CoV-2: The world experienced a number of twists and turns in the pandemic during the course of 2021. Vaccine rollouts during the first half of the year drove case counts lower in much of the developed world. The summer and early fall were dominated by the delta variant, which proved especially deadly for the unvaccinated. Omicron emerged in late November and quickly became dominant worldwide thanks to its ability to evade the initial protection from vaccines. Thankfully, evidence soon emerged that existing vaccines (and especially boosters) still provide significant protection against severe disease and death, and also that omicron is more likely to cause mild covid even in the absence of any protection from vaccines or previous infection.

Economy: The US economy grew rapidly in the first half of the year, but the pace of growth slowed in Q3 as the delta variant snarled supply chains worldwide. At year-end, consensus estimates for 2021 US GDP growth stand at +5.6%, which would be the highest since 1984. Housing and labor markets remain strong, jobs are plentiful (even if workers are not), household and corporate balance sheets are flush with cash, and demand for most goods and services is robust. At the same time, supply chain  bottlenecks and persistent labor shortages are causing inflation to run hot, at levels not seen in the US in more than 30 years.

Bond market: Bonds had a challenging 2021 as yields began to normalize from ultra-low levels coming into the year. But despite much hand-wringing about inflation, 10y and 30y Treasury yields actually peaked in March and the curve flattened as the year progressed. By year-end, investors were pricing in three rate hikes in 2022 as the Fed rapidly winds down its asset purchase programs. Meanwhile, credit spreads compressed as pandemic-driven default risk abated, cushioning price declines for investment grade corporate bond holders and generating strong returns in riskier high yield bonds.

Stock market: US stocks capped an excellent year with a strong December finish. Outperforming sectors in 2021 included energy (+54.4%), real estate (+46.1%), financials (+34.9%), and tech (+34.5%).  International stocks lagged, particularly emerging markets which collectively finished slightly lower on the year. Much of the drag in E/M came from China, which experienced multiple waves of regulatory scrutiny that caused investors to dial back their growth assumptions for many Chinese companies.

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Weekly Market Recap

Markets took a risk-off tone last week as investors grappled with the twin concerns of rising covid-19 case counts and an inflation-fighting Fed. As was widely expected, Fed Chair Jerome Powell announced an increase in the pace of asset purchase tapering, and the updated “dot plot” indicated that FOMC members expect 3 rate hikes by the end of 2022.

Traditional defensive sectors registered gains on the week, including healthcare, staples, real estate, and utilities. Meanwhile, cyclicals and tech finished lower, as did small and midcap stocks. International markets were also down on the week. Bond markets rallied as the Treasury yield curve flattened once again. While 2y yields were mostly stable, 10y yields fell 8bp to finish at 1.40%, while 30y yields ended the week 7bp lower at 1.81%. Credit spreads widened moderately, resulting in more muted price gains for corporates.

Most commodity prices slipped a bit last week on concerns that omicron could impact short-term demand. Oil fell by a little less than $1/barrel.

Other economic news was mixed last week. Retail sales for November missed consensus estimates, jobless claims remained low, housing starts and new residential building permits gained strength, and inflation data (PPI and import/export prices) continue to run hotter than expected.

This audio version of the Weekly Market Recap can be found in your favorite podcasting app. Search for “Albion Financial Group” and subscribe!
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Harvesting Cryptocurrency Losses

By Patrick Lundergan, CFP®

As we near the end of another good year for domestic equities, many investors find themselves facing substantial capital gains taxes. Generally, if you wish to minimize capital gains tax, you should sell securities with a loss to offset those gains – doing this strategically is called tax-loss harvesting. A potential downside to this strategy is that losses are disallowed if the investor purchases back the same security within 30-days of the initial sale, effectively eliminating the ability to recognize the losses on their taxes. This rule, called the wash-sale rule, forces an investor to get out and stay out if they want their loss to count. Cryptocurrency, however, is an exception to the rule for this year and this year only.

Bitcoin hit its all-time high in November of this year at just over $68,000. However, after weeks of decline, Bitcoin’s price stands just below $47,000. While this is still well above Bitcoin’s January price of $30,000, the volatility has left some people seeing red in their crypto portfolios. The following insights will help answer what we can do before year-end. 

The IRS defines cryptocurrency as a capital asset subject to capital gains rates, like a stock.  In 2021 you can sell cryptocurrency at a loss and immediately re-enter the position without disqualifying the loss.  This loophole is the only one of its kind for investors who want to recognize losses without the penalty of staying out of their positions for 30-days. Investors should consider this a viable planning strategy before the IRS implements wash-sale rules on all cryptocurrencies in 2022.

Those with losses that exceed their realized capital gains can also take advantage of the unlimited tax loss carryforward. Any loss that exceeds capital gains in a given year can be used to offset $3,000 worth of income until the total loss is exhausted. Simply put, you can harvest an unlimited amount of losses and carry them forward to an unlimited number of tax years. Although this is true for other capital assets, digital currency is our only way to avoid the wash-sale rule in 2021.

The tax landscape is constantly changing and evolving, especially with digital assets such as cryptocurrency. We are not CPAs, tax accountants or attorneys and do not give legal or tax advice. We are fortunate to work with excellent tax and legal professionals and are happy to provide a recommendation if needed. We encourage all our clients to reach out to us with your questions and concerns. We are happy to be your first call to help you determine if you need to seek out additional expertise.

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Weekly Market Recap

Last week was a strong one for risk assets as it became increasingly clear that while highly contagious, the omicron variant is very likely to cause a lower rate of serious disease and death than previous strains of the coronavirus.

Most bond prices fell as the Treasury curve experienced significant bear steepening: 2y yields rose 6bp, 10y yields were up 14bp, and 30y yield finished higher by 21bp.

Credit spreads compressed, particularly in high yield, echoing the move higher in equities.

Commodity prices also moved higher last week, with oil gaining more than $5/barrel.

Economic news was mostly positive:

* Weekly unemployment claims fell below pre-pandemic levels

* Consumer price inflation, while high, was in line with consensus estimates

* U of Michigan consumer sentiment rose in preliminary December data

This audio version of the Weekly Market Recap can be found in your favorite podcasting app. Search for “Albion Financial Group” and subscribe!