The FCMS Investment Committee is pleased to share the latest insights on the current financial market and economic developments.

Market Perspectives

Here are the top things from our FCMS Investment Committee on current financial markets and economic developments:

1. 1. A Clear Message for Investors Regarding Rate Cuts

      Upside surprises to both consumer and producer price inflation last week left a clear message for fixed income investors – rate cuts are coming later than we thought. The front end of the curve drove the repricing in yields as the timing of the first Fed rate cut was pushed back into summer. With the 10-year yield closing above 4.2%, the door is open to modest upside in interest rates over the next few weeks. The move in rates pushed investors to sell equities, breaking a 5-week winning streak in the S&P 500.

   2. Mega-Cap Tech and AI Winners Get Outperformed

      Under the hood of the equity market, the price action was less straightforward. Equity sectors that have been more sensitive to yields, like small caps and value, outperformed mega-cap tech and growth AI winners last week. This is surprising since the YTD leaders have been largely resilient to moves higher in rates. Investors will be paying close attention to the relationship between rates and equity market leaders in the coming months.

   3. Nvidia Earnings Shine & PMI Data Set to Provide Important Updates

      This holiday-shortened trading week will bring plenty of catalysts. On the earnings front, as we mentioned earlier, AI-darling Nvidia reported earnings on Wednesday afternoon, tripling its quarterly sales and beating Wall Street estimates. Not only is Nvidia now the third largest stock in the S&P 500 Index, but the way it trades is a key sentiment barometer for the recent themes leading domestic equity markets, namely the “Magnificent 7”, growth, and quality. Zooming out, PMI data for February in the U.S. and most of the developed world will provide an important update on global growth conditions. Lastly, we look to China, which returns from its Lunar New Year holiday. Investors are looking for confirmation from China’s local stock market, typically a more powerful signal than the “fast- money” dominated offshore equity market, that China’s supportive policy actions are translating to a rebound in investor sentiment.

What Happened Last Week?

Here is a recap of the top things that happened last week:

• Hot inflation print pushed back the expected start of rate cuts; more importantly, longer- term interest rate expectations drifted higher, weighing on equities.
• The move higher in rates coincided with YTD equity market leaders (AI winners) underperforming the small- cap and value laggards (AI losers).
• The S&P 500 broke a 5-week winning streak, closing a hair above the 5,000 level.

What We’re Watching This Week

Here is a recap of what we’re watching for this week:

• Nvidia’s earnings on Wednesday surpassed expectations; it could reinforce YTD leadership.
• Global PMI data should provide investors with a signal on global growth.
• Outside the US, Chinese onshore markets reopen; we are looking at how local investors react to recent policy support.

To receive weekly updates from the FCMS Investment Committee, please subscribe to our blog and follow us on our social media channels for the latest information.

To learn more about FCMS Investment Management, click here.

Securities and Investment Advisory Services offered through Founders Financial Securities, LLC (FFS). Member FINRA, SIPC and Registered Investment Advisor. The commentary in this report is not a complete analysis of every material fact in respect to any company, industry, or security. This material contains the opinions of the author(s) but not necessarily those of FFS, and such opinions are subject to change without notice. This material has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and do not constitute a solicitation to buy or sell any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Index information is intended to be indicative of broad market conditions. The performance of an unmanaged index is not indicative of the performance of any particular investment. Individuals cannot invest directly in any index. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed. Investors should consult their financial, tax, and legal advisors before making investment decisions. Past performance does not guarantee future results. Materials above are produced by Horizon Investments, LLC, which is not affiliated with FFS. © 2022 Horizon Investments, LLC.