Equities Gain Steam to End Q1

Equities Gain Steam to End Q1

Equity markets had a strong final week of the first quarter as short-term volatility eased from the recent banking sector concerns. Global equities (represented by the MSCI All Country World Index) were up 3.56%, and domestic stocks (represented by the S&P 500 Index) were up 3.50%.

PCE Index

Last week’s Personal Consumption Expenditure (PCE) price index reading showed both core and headline inflation coming in at a slower pace than expected for February. US core (excluding food and energy) PCE rose 4.6% year-over-year, lower than consensus estimates of 4.7% and down from its high of 5.4% in February 2022. However, the rate still sits above the Fed’s 2% long-term inflation target.

According to a preliminary estimate, Eurozone inflation fell to a rate of 6.9% in March from 8.5% in February, the lowest level in 12 months aided by moderating energy costs.

Consumer Sentiment

The University of Michigan’s US Index of Consumer Sentiment fell for the first time in four months as more consumers expect a recession looming. However, year-ahead inflation expectations actually fell to the lowest reading since April 2021 at 3.6%. The CBOE’s VIX which is used as a measure of short-term stock market volatility fell sharply the past two weeks after spiking due to investor concerns around the banking sector.

Labor Market Update

This week’s economic data schedule includes a labor market update for March and manufacturing data from the Institute for Supply management. The labor market has remained resilient as the US economy has continued to generate more jobs than expected and the unemployment rate stayed at historically low levels.

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.