February 7, 2022
Good morning,
Welcome back! I did breath a sigh of relief Friday afternoon knowing that the first bona-fide, disconnect vacation in a long time for me, didn’t end with a free-falling equity market. What a nice change – maybe I should do it more often now.
Last week the equity market had its best week of the year so far. That is a low bar given January’s upheaval, but the S&P 500 Index did end a volatile week up +1.55%. However, while stocks were bouncing back from January’s sell-off, the real action last week was in bond-land. Yields across the entire treasury curve jumped up over 15bps and landed the 10yr on two-percent’s door – 10yr’s are trading at 1.92% this morning. They were 1.50% only five weeks ago at year end.
Big picture: The January sell-off sent the market to oversold levels and sentiment to extremes of pessimism last seen in April 2020. And it also improved valuations, setting the stage for the market recovery now underway. The strength of this recovery will likely be the market’s “tell” of what the rest of the first half of the year may hold. We shall see.
Be well,
Mike