Market Insights: Last Week in Review with Rusty Vanneman, CFA, CMT, Vol. 87

Hope you had a great weekend and got to enjoy the weather – I got in (likely one of my last for the year) a nice round of golf on Sunday.

Despite a near 3% loss on Friday, the total US Market finished with a modest gain of nearly 2%; gains were led by value stocks and small caps (Morningstar, Oct. 2022).

Early in the week, the S&P 500 had its best two-day gain since the coronavirus pandemic began in 2020 (Morningstar, Oct. 2022).

For the year, the asset classes with gains are Commodities (~20%) and Cash (~1%) (Morningstar, Oct. 2022).

The stats are on our side as we approach the end of the year: in the fourth quarter, the average return on the S&P 500 has been over 4% since 2000 (Morningstar, Oct. 2022).

Deeper Dive

Quite a week for interest rate volatility last week, including these headlines:

  • In the end, last week Ten-year Treasury yields finished at 3.88% (up another 8 basis points over the last week) (Yahoo! Finance, Oct. 2022). The highest yield last week was 3.91%; the 10-year yield has now risen for the tenth straight week, the first such streak since the 1970s (Yahoo! Finance, Oct. 2022).
  • The yield to maturity on the Bloomberg Aggregate Bond Index also rose last week to 4.78% (Bloomberg, Oct. 2022).
  • The average money market yield rose another 5 basis points last week, finishing at 2.71% as of  Oct. 7, 2022 (Crane Data, Oct. 2022).
  • The average 30-year fixed mortgage rate increased to 6.89% (up 7 basis points) last week (Bankrate, Oct. 2022).

Link: US Mortgage Rates Rise for Seventh Week to Highest in 16 Years (Bloomberg, Oct. 2022).

The Typical Sentiment Cycle by SentimenTrader is shown on Bloomberg’s Oct. 4, 2022 article by  John Authers.

Key economic data last week included jobless claims and unemployment. Despite the number of new jobs coming in below expectations, the unemployment rate decreased to 3.5%, a potential sign that the Fed will continue to raise rates in the following weeks and still has a ways to go with its fight with inflation (Bureau of Labor Statistics, Oct. 2022).

Thanks to the better-than-expected economic data last week, the Atlanta Fed’s GDPNow‘s estimate for real (“after-inflation”) GDP growth (which uses actual economic data for inputs) increased by a few basis points last week to a current estimate of 2.9% for Q3 2022 GDP, as of Oct. 7, 2022 (GDPNow, Oct. 2022).

The key report this week on the economic calendar is CPI on Thursday, Oct. 13. This is likely the report that is on the top of everyone’s mind as inflation is still near historical highs as we approach the end of 2022 (Calculated Risk, Oct. 2022).

As for earnings, third-quarter earnings according to I/B/E/S earnings data from Refinitiv:

  • 22Q3 Y/Y earnings are expected to be 4.1%. Excluding the energy sector, the Y/Y earnings estimate is -2.6% (Refinitiv, Oct. 2022).
  • Of the 20 companies in the S&P 500 that have reported earnings to date for 22Q3, 65.0% have reported earnings above analyst estimates. This compares to a long-term average of 2% and prior four-quarter average of 78.1% (Refinitiv, Oct. 2022).
  • During the week of Oct. 10, 14 S&P 500 companies are expected to report quarterly earnings (Refinitiv, Oct. 2022).

Crypto Corner – Grant Engelbart, CFA, CAIA, Brinker Capital Sr. Portfolio Manager

  • Cryptocurrency prices edged slightly higher last week, as Bitcoin rose 1.5% to near $19,500, and Ethereum climbed 2% to near $1,300; Ripple jumped 15% while Polygon and Uniswap added 6% each (Decrypt, Oct. 2022).
  • Kim Kardashian took most of the week’s crypto headlines … she was fined $1.26 mil for failing to disclose how much she was paid to promote a token on her Instagram (Decrypt, Oct. 2022). The largest crypto exchange, Binance, was hacked on its Binance Chain Blockchain, more specifically a ‘Bridge’ connecting multiple blockchains rather than the blockchain itself (CoinMarketCap, Oct. 2022). Bridges have been hacked ad nauseum this year (Decrypt, Oct. 2022). Ripple popped higher again as speculation continues related to their ongoing legal battle with the SEC (Decrypt, Oct. 2022). Grayscale launched a fund to invest in mining infrastructure, an industry that has seen a rash of changes during the Bitcoin bear market and Ethereum merge (Decrypt, Oct. 2022).
  • There was no news of note in the crypto related ETF universe (Arcane Research, Oct. 2022).

Additional Resources

You were born to fit in, but investing requires you stand out.” – Dr. Daniel Crosby (Orion, Oct. 2022)

Last week’s Orion’s The Weighing Machine podcast was with John Crawford and David Gilmore from Crawford Investment Counsel. Dividend oriented strategies have been performing well this year, and Crawford is no exception. Besides learning about Crawford, did you like their use of the kazoo in the interview? In the upcoming podcast, we hear from arguably the premier college savings / 529 expert in the college savings industry, Paul Curley. If you have future education expenses, or if your clients do, you should listen to this important podcast.

Given the markets, the economy, COVID, weather, and politics, many people are feeling burnt out. Here’s Ryan Holiday’s Oct. 3 blog post on the secret to avoiding burnout.

What is the most popular grocery store in your state? (The Takeout, Oct. 2022).

Thanks for reading and have a great week! As always, please let us know what we can do better at rusty@orion.com or ben.vaske@orion.com. Invest well and be well.

For financial advisors to get this commentary delivered straight to your inbox, please subscribe at orionportfoliosolutions.com/blog.

 

1894-OPS-10/11/2022

Orion Portfolio Solutions, LLC, a registered investment advisor, is an affiliated company of Brinker Capital Investments, LLC, a registered investment advisor, through their parent company, Orion Advisor Solutions, Inc.

The CFA is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.

The CMT Program demonstrates mastery of a core body of knowledge of investment risk in portfolio management. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. To learn more about the CMT, visit https://cmtassociation.org/.

The CAIA® is the globally-recognized credential for professionals managing, analyzing, distributing, or regulating alternative investments. To learn more about the CAIA, visit https://caia.org/.

About Rusty Vanneman, CFA, CMT
Rusty Vanneman serves as the Chief Investment Strategist for Orion Advisor Solutions. An industry veteran with more than 30 years of investment experience, Rusty creates relevant market- and platform-related content that supports deeper, more engaging conversations with advisors and investors, educating key internal and external audiences on Orion Portfolio Solutions’ strategies and resources to help deliver favorable investor outcomes, and helps identify new investment offerings to meet growing marketplace demand. Rusty is a host of Orion’s The Weighing Machine podcast and authored the book “Higher Calling: A Guide to Helping Investors Achieve Their Goals.” Rusty has also managed multiple mutual funds and hedge funds during his career and was named one of the Top 10 Portfolio Managers to Watch by Money Management Executive in 2017. Prior to Orion’s acquisition of Brinker Capital in 2020, Rusty was the Chief Investment Officer for Orion Advisor Solutions and prior to that was the President and Chief Investment Officer of CLS Investments. Before joining Orion in 2012, Rusty served as the Chief Investment Officer and Managing Director for a multi-billion-dollar registered investment advisor (Kobren Insight Management) in the greater Boston area. His 11-year tenure at the RIA included a five-year span when the firm was owned by E*TRADE Financial where he also served as the Senior Market Strategist for E*TRADE Capital. Prior, Rusty was a Senior Analyst at Fidelity Management and Research (FMR Co) in Boston. Additional work experience includes Thomson Reuters, General Electric, and as a cattle ranch hand in the Nebraska Sand Hills. Rusty received his Bachelor of Science in Management from Babson College in Wellesley, Massachusetts, where he graduated with high distinction. He holds the Chartered Financial Analyst (CFA®) designation and is a member of the CFA Institute. He is also a Chartered Market Technician® (CMT) and is a member of the Market Technician’s Association (MTA).