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 3 things from our FCMS Investment Committee on current financial markets and economic developments:

1. 1. Cyclicals Lead the Way as Major Indices Close Strong Quarter

      Last week, the major stock indices continued to rise, concluding a strong quarter in a historically solid start to the year. The S&P 500 is up approximately 17%, and the NASDAQ 100 is up approximately 40% year-to-date. The recent gains were led by cyclicals, a significant shift from the dominance of mega caps seen throughout the year. This cyclical outperformance can be attributed to better-than-expected economic data, such as consumer confidence, GDP revisions, and income. Our perspective is that the temporary pause in the outperformance of tech and mega caps is a positive development that promotes a healthy market.

   2. Economic Data Impacting Fed and Bond Market, Higher Yields Approaching Inflection Point for Equities

      We must recognize the impact of better economic data on the Fed and the bond market. The 2-year yield increased by almost 90 bps in the second quarter, approaching 5%. Additionally, the market closed on Friday with a strong jobs report, one strong jobs report away from the pre-SVB highs. Higher yields are not yet affecting the equity market; however, we believe this relationship is approaching an inflection point, and interest rates may become a headwind for valuations. This is due to the multiple expansions seen this year. Unless core inflation falls to the Fed’s target of 2%, the upside of equities may be limited. Moreover, market volatility may increase in the coming months.

   3. Holiday Lull Expected for Trading Week Despite Key Labor Market Data Releases and OPEC+ Meeting in Vienna

      Even though there will be important labor market data releases, the upcoming trading week will likely be quiet due to the holiday. Be aware that there may be significant price movements with low trading volume. The OPEC+ meeting in Vienna is the primary focus overseas, with the recent events in Russia no longer dominating headlines.

What Happened Last Week?

Here is a recap of the top 3 things that happened last week:

• The S&P 500 ended the quarter on a high note, closing at its highest level since April last year.

• Yields worldwide increased due to strong economic data and central banks adopting a more hawkish stance.

• The annual stress test by the Fed showed that U.S. banks have passed. However, bank stocks did not show any significant reaction as concerns about profitability still linger.

What We’re Watching This Week

• This week’s economic highlight is the release of Friday’s non-farm payrolls. In addition, job openings and weekly claims data will provide further information on the state of the labor market.

• Price action and the potential for large moves in relatively illiquid trading.

• The upcoming OPEC+ meeting and events in Russia may affect the geopolitical situation, but it is not expected to immediately impact the market.

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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.