Market Insights
May 2022

Phillips rally

Global equities experienced a bout of volatility in May but nonetheless managed to limit their losses (S&P 500 unch Nasdaq 100 1 7 Stoxx Europe 600 1 6 Investors initially welcomed the Fed’s 50 bps rate hike and its accompanying signals that 75 bps moves were not ‘ considered, but concerns over the central bank’s ability to tame inflation without triggering a growth slowdown quickly resurfaced after i a relatively strong U S jobs report (unemployment rate steady at 3 6 in April and non farm payrolls increasing by 428 k, well above consensus estimates of 391 k),k),( higher than expected U S CPI prints (headline number up 8 3 year over year in April vs consensus 8 1 the highest level in more than 40 years),years),( disappointing earnings at large U S retailers (Walmart), with inflation hurting bottom lines and causing shoppers to rein in spending.

We, however, saw a sharp reversal in the week ended May 27 with the S&P 500 jumping 6 6 %%(the strongest week since November 2020 as the two PCE readings marked their first synchronous deceleration in a year and a half (headline/core softening to 6 3 4 9 respectively in April from 6 6 5 2 in March) This came on top of early signs of deterioration in the jobs market (if we dare to look beneath the surface) Take the Conference Board Employment Trends Index for example, an aggregate of eight labor market indicators that shows, as the name suggests, underlying trends in employment conditions The reading decreased slightly in April to 120 2 down from 120 8 in March 2022 Perhaps more interestingly, its year over year growth has sharply receded from April last year Initial Jobless claims, one of its critical components, bottomed in mid March at 168 k and have ticked up regularly over the past weeks 210 k for the week ended May 20 Temporary hiring, another critical component and a good indicator of anticipations made by U S corporates on consumer demand, has been essentially flat for the past two months.

Hans Itburrun

Chief Investment Officer,
Head of EAM & Head of Asset Management

Hans Itburrun

Hans Itburrun

Chief Investment Officer,
Head of EAM & Head of Asset Management