Carson Francis
Financial Analyst
Markets wasted no time this week after returning from a long holiday weekend, as safe-haven assets reached all-time highs and growing uncertainty over future economic conditions. Before we get into that, the National Hockey League kicked off a new event called the 4 Nations Face-Off, temporarily replacing their annual NHL All-Star match. The Championship match between teams USA vs. Canada took place last night, with Canada claiming victory with a goal in overtime. Although Team USA Fell short against hockey’s traditional powerhouse, their performance was yet another reminder that American excellence isn’t limited to the things we’re known for.
Gold spot prices reached an all-time high this week, driven by escalating geopolitical tensions and rising central bank demand—most notably from China, which is increasing its reserves to diversify assets. Historically, gold has been viewed as a safe-haven asset for investors seeking protection from riskier assets during times of market volatility. This coincides with other recent events that have called into question the modern-day consumer and their resilience during the post-COVID era.
Walmart reported earnings this week, surprising many investors, as John D. Rainey, the major retailer’s CFO, raised concerns over “uncertainties related to consumer behavior and global economic and geopolitical conditions”. Cracks in consumer confidence appeared in this morning’s data, with University of Michigan Sentiment Index reading 64.7, which is below the long-term average of around 85-90.
Business activity in the manufacturing and services sectors, as measured by the U.S. Composite Purchasing Managers' Index (PMI), came in at 50.4 this morning—falling short of survey estimates of 53.2 for February. This downward trend is also evident in the housing market, as Existing Home Sales declined 4.9%, a steeper drop than the -2.6% forecast in surveys taken prior to the reading.
Turning to Treasury yields, the 10-Year US Treasury yield descended from last week’s spike influenced by January Consumer Price Index reading. The benchmark rate so far has chalked in a 10-bps drop, the rate topped at 4.55% at the beginning of the week and is now trading at 4.45%. Traders are grappling with inflationary pressures amid a stream of bleak economic data, as the 10-Year yield has whipsawed in recent months, reflecting uncertainty in markets.
Next week will be an important week for future monetary policy, with the Personal Consumer Expenditure (PCE), the Federal Reserve’s preferred measure of inflation, set to release on the 27th. Additionally, other important data such as GDP, MBA Mortgage Applications, New Home Sales, and Durable Goods Orders will give investors a clearer outlook on market conditions. Have a great weekend everyone!