The Lookout | Week of May 02, 2022
As earning season begins to wrap up and the eyes of the market turn to the Fed, here’s what our investment team is watching this week! We’re featuring insights from Dan Rudnitsky of SMH Advisors and Joe Tigay of Equity Armor in this edition of The Lookout.
Major Market Events:
Wednesday, May 4: Fed Interest Rate Decision & FOMC Statement
Thursday, May 5: Bank of England Interest Rate Decision
Friday, May 6: US Unemployment Report
Joe Tigay, Equity Armor Investments, Portfolio Manager of a volatility-hedged equity fund.
- Stocks continue to slump and are close to year-to-date lows as we approach the Fed meeting this week.
- European markets struggled Monday morning with a flash crash in Nordic countries causing some concern for liquidity. Further east in China there is growing concern that their real estate house of cards is losing stability. On the other hand, if the economy slows down faster than expected, inflation will cool faster than expected.
- Recent historical precedent of slow economic growth and low inflation has meant quantitative easing from the Fed, which led to inflating equity prices.
- Investor sentiment is quite bearish, but the market has not seen a key flush out bottom, which is typically characterized by heavy volume selling paired with a spike in the VIX.
Daniel Rudnitsky, SMH Advisors, and Senior Portfolio Manager of an income strategy
- The two-day Federal Reserve meeting will conclude with a rate announcement on May 4. The market has fully priced in a 50 basis point hike for May with many economists clamoring for a 75 basis point hike. The bond markets have priced in another five to six 25-point hikes before the end of year.
- The economic calendar for the week also includes updates on construction spending, durable goods orders, trade balance, and importantly, the U.S. jobs report. The prominent concern of the markets is the danger of a recession. Whether or not the Fed is able to manage the tightening so that a recession would be avoided is top of mind.
Thank you for reading The Lookout. Come back next Monday for more insights on what investors can expect in the markets.