The Bottom Line

● Global equities sold off for the first week of the year as market participants switched into risk-off mode as they priced in a more hawkish Fed.
● Yields skyrocketed this past week with the yield on the 2- Year Treasury Note jumping 14bps and the yield on the 10-Year Treasury Note climbed an astounding 26bps for the week.
● Economic relatedly data for the fist week of the year showed that labor markets remain tight with the official government numbers missing their topline estimates, but wage growth remained robust. Manufacturing data came roughly in line with estimates and Construction Spending disappointed.

Jump in 10-Year Yield Causes Equity Selloff

Equities started off the new year with their worst start since 2016. The S&P 500 was down -1.87%, but the real pain was felt in the tech heavy sector, which has been deemed more sensitive to rising interest rates. Tech, as measured by the Nasdaq Composite, was down -4.53% for the week as the yield on the 10-year US Treasury Note shot up to its highest level since March of 2021, up a whopping 26bps for the week. Domestic Small Cap equities, as measured by the Russell 2000, didn’t fair much better than the tech heavy Nasdaq index. The Russell 2000 was down -2.92% for the week. International was able to fair modestly better than domestic equities but were still in the red for the week. Japanese equities, as measured by the Nikkei-225, were down -1.09% for the week and European equities, as measured by the STOXX Europe 600, were markedly better only down -0.32% for the week. With the hawkish Fed speak lately combined with the rampant spread of the omicron variant has turned market participants into risk-off mode.

Digits & Did You Knows

LIVING JUST A LITTLE LESS – The life expectancy at birth of an American baby in 2020 was 77.0 years, down 1.8 years from 78.8 years in 2019 and the largest single-year life expectancy decline since 1943. The 2020 life expectancy number is just under the 2003 life expectancy of 77.1 years. (source: Center for Disease Control, BTN Research).
HOUSING –The average interest rate nationwide on a 30-year fixed rate mortgage was 3.11% at the end of 2021. The all-time record low national average is 2.65%, set on Thursday
01/07/2021. (source: Freddie Mac, BTN Research).
OIL PRICES–The price of oil ended 2021 at $75.21 a barrel, up +55.0% from its 2020 close of $48.52 a barrel. Oil’s all-time high price is $147.27 a barrel as of 07/11/2008. (source: CME Group, BTN Research).

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Source: Bloomberg. Asset-class performance is presented by using market returns from an exchange-traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High-Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 31% International Stock, 7% Emerging Markets, 3% Real Estate.

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