What happened last week
- Price action: The S&P 500 rose higher and through key technical levels, recovering the majority of April’s losses.
- Interest Rates: Ahead of this week’s CPI release, the march higher in bond yields has taken a pause.
- Consumer Sentiment: Falling consumer confidence added to a burgeoning negative narrative around the health of this key economic pillar.
What we’re watching this week
- U.S. Data: All-important April inflation reading following string of upside surprises; retail sales data also provides a pulse on the consumer.
- Fundamentals: Earnings from key consumer companies like Walmart and Home Depot will provide additional context on the state of the U.S. consumer.
- International Data: Growth data out of other key geographies including Japan, the European Union, and China, round out the week.
Horizon’s Investment Management Views
Stocks marched higher last week amidst relatively little newsflow after a litany of macro and fundamental catalysts in late April. The S&P 500 traded well through its 50-day moving average (a key trend measure) and closed the week less than 1% from its previous all-time high. Encouragingly and unlike much of last year, market breadth is improving as the market climbs. We are keeping a watch on tangential AI-plays and more cyclical parts of the market that may benefit from a near-term stabilization in China’s economy.
Bond yields were relatively flat despite a deluge of corporate and government supply last week. The upward trend in rates that characterized much of April has stalled out recently due to a soft patch in U.S. economic data. Indeed, bears are thumping their chests that the consumer is finally rolling after a sharp fall in consumer confidence and weaker-than-expected guides from some consumer-facing companies in this earnings season. Our view is that only widespread job losses can materially dent consumption; recent action is more likely a case of overly optimistic projections due to the extrapolation of short-term trends by the economic community. This wouldn’t be the first time economists have fallen into this trap in the post-Covid period. Even still, we are keeping an open mind as news comes in.
Headlining the week ahead is the April CPI print, which the market is anxiously awaiting following the string of upside surprises that had catalyzed some of the move higher in interest rates we mentioned earlier. On the growth front, retail sales, small business confidence, and earnings from Walmart, Home Depot, and Ross are the highlights. Outside the U.S., growth data from Japan and the European Union, in addition to Chinese retail sales data, will provide fresh updates on global growth trends.
CPI = Consumer Price Index. The commentary in this report is not a complete analysis of every material fact with respect to any company, industry, or security. The opinions expressed here are not investment recommendations, but rather opinions that reflect the judgment of Horizon as of the date of the report and are subject to change without notice. Forward-looking statements cannot be guaranteed. We do not intend and will not endeavor to provide notice if and when our opinions or actions change. This document does not constitute an offer to sell or a solicitation of an offer to buy any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional. Equities are represented by the S&P 500 Index, which is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. References to indices or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such.
Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC.
© 2024 Horizon Investments, LLC.
