The week in review
The Sandbox Daily (3.10.2023)
Welcome, Sandbox friends.
Today’s Daily is brief due to family travel to New York City, so what follows is a short recap to snapshot the week in markets.
Here’s the Color Factory in SOHO.
Let’s dig in.
Markets in review
EQUITIES: Dow -1.07% | Nasdaq 100 -1.38% | S&P 500 -1.45% | Russell 2000 -2.95%
FIXED INCOME: Barclays Agg Bond +1.17% | High Yield +0.01% | 2yr UST 4.593% | 10yr UST 3.704%
COMMODITIES: Brent Crude +1.31% to $82.64/barrel. Gold +1.78% to $1,867.2/oz.
BITCOIN: -0.38% to $20,255
US DOLLAR INDEX: -0.64% to 104.637
CBOE EQUITY PUT/CALL RATIO: 0.81
VIX: +9.69% to 24.80
Quote of the day
“Identifying the direction of primary trends is helpful because without understanding the environment we’re in, how could we possibly pick and choose which tools and strategies to incorporate?”
-J.C. Parets, All Star Charts
The week in review
Talk of the tape: It is not often that the non-farm payrolls report is not the biggest focus of financial media news outlets. But that was the case today, with regulators shutting down a prominent bank in Silicon Valley. Investors flooded into the safety of U.S. Treasuries, sending yields lower across the curve.
The bull narrative is largely focused on soft/no landing scenarios, a broader (albeit choppy) disinflation trend, corporate cost-cutting efforts, elevated cash levels and still below average positioning, recent technicals holding, and China reopening.
The bear narrative gained momentum this week on upside risk to peak rates, risk in the banking sector bubbling to the surface, potential Fed policy mistakes, earnings/margin risk, negative liquidity dynamics (think M2 money supply turning negative), geopolitical risks, and the recession signaling from 1) curve inversion, 2) energy shocks, and 3) hawkish global monetary policies.
Stocks: Stocks ended the week lower on the back of Federal Research Chair Powell’s Senate Banking Committee testimony as he reiterated the central bank’s higher-for-longer mantra this week. Concerns over the banking sector, given Silicon Valley Bank Financial’s challenges, also caused market participants to lighten portfolio risk. The S&P 500 Index this week fell to a seven-week low, below its 200-day moving average.
A relative bright, Japan’s Nikkei reached a six-month high this week as investors believe that the Bank of Japan will maintain its ultra-accommodative stance in the near-term. In addition, Japan’s wholesale inflation fell for a second straight month as household spending came in mixed.
Bonds: The Bloomberg Aggregate Bond Index finished the week little changed as yields steadied as they increased for four straight weeks. Bonds have been directly influenced by concerns over the general inflationary landscape as some traders believe the Federal Reserve will maintain its higher-for-longer policy.
U.S. bank equities came under significant pressure on Thursday following reports that SVB Financial was taking steps to raise capital in response to large losses on its securities portfolio. In the bond market, the reaction has been far more contained. While regional banks underperformed the broader index, large U.S. banks were better behaved relative to their equities, likely indicating the bond market is not viewing this week’s event as a larger systemic risk.
Commodities: Energy prices finished lower this week as traders grew concerned over future demand given Powell’s comments concerning inflation and interest rates earlier this week. The major metals, gold, silver, and copper, also ended the week mixed amid concerns over economic growth.
That’s all for today.
Blake
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily.