The widely watched S&P 500 Index recorded its strongest weekly gain in nearly a year setting a decidedly bullish technical tone as signs of a slowing economy and a policy statement from the Federal Reserve or the Fed that was generally perceived as dovish led to a sharp decrease in long-term bond yields. After topping 5%, 10-year Treasury yields dropped materially last week, falling below 4.6%. The US dollar traded lower but who cares!
After a somewhat dovish FOMC meeting earlier in the week, payroll gains almost halved in October from the previous month. The biggest economy on the planet added 150,000 jobs last month, bringing payroll gains back in line with their previous downward trend. It fits into the evolving narrative of a dramatic slowing of the US economy after the heady 4.9% annualized pace in Q3.
Higher rates have tightened financial conditions and helped the Powell’s efforts to fight inflation. I finally got it. The Fed is done with hiking rates. Please refer to my previous article on “The Fed is done!”
Thank-you Yellen! Another factor boosting overall market sentiment appeared to be the US Treasury’s announcement that it would sell USD112 billion of longer-term securities at its quarterly refunding auctions the following week, slightly below its original projection of USD114 billion.
The market can be a crazy place. However, investing is a lot calmer when you remember that nothing goes up in s straight line even in a bull market. Never argue with the market trends – regardless of the fundamentals.