What a week last week. Then again, aren’t they all? Last week was notable for various reasons, but for investors the list begins with the weekend geopolitical stress from Iran attacking Israel. This is a fluid situation, of course, with the potential to get worse. As of this writing, however, efforts by the U.S. to encourage Israel not to retaliate has calmed the markets. The attack was well telegraphed which allowed damage to be contained.

For investors, the most important rule to heed in response to a geopolitical crisis is not to panic. That said, it does bear monitoring for multiple reasons.

Geopolitical stress was one key factor for the markets last week, but there were other notable factors. Leading the way was the renewed concern about inflation given last week’s Consumer Price Index surprising again to the upside. Then again, month-over-month Core CPI inflation reads have been moving higher since last summer. Last week’s Producer Price Index was initially more encouraging, though it should be noted that through the first three months of 2024, producer prices rose at a 4.4% annualized pace and year-ago comparisons are back on the rise and back above 2.0% for the first time since April of last year.

In response, market expectations for the Fed cutting short-term rates dropped sharply again last week, with the market now expecting an approximate 10% chance of no cuts in 2024. Don’t be surprised to start seeing the market start to price in some potential hikes if the data doesn’t improve soon. Another key driver in market performance last week, especially at week’s end, were earnings reports, particularly from some of the large financial firms. While they generally beat 1Q24 expectations, they also guided lower moving forward. While this earnings season behavior is somewhat typical, the stock market didn’t like it.

In the end, stocks lost ground last week, though at one point the NASDAQ hit a new record high last week. Amazon also finally hit a new all-time high. Bonds did lose ground, as 10-year Treasuries rose from 4.4% to nearly 4.6% last week. Last Wednesday witnessed the biggest one-day jump in 10-year yields since September 2022. Commodities did gain ground last week, as did the U.S. dollar. The latter is now up 3% year-over-year.

This coming week is light on the economic calendar, with the only major report being Retail Sales on Monday. There will also be notable earnings reports this week, including from more major financial firms. Jay Powell will be speaking on Wednesday alongside the release of the Beige Book. Otherwise, expect key drivers this week to be updates on the Middle East, and the movement of interest rates and commodity prices.

Bottom line:


Stay invested. Stay diversified. Stay disciplined.


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The views expressed herein are exclusively those of Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments a registered investment advisor, and are not meant as investment advice and are subject to change.
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