To borrow from Lenin, last week was one of those market weeks where it seems like there was a year’s worth of moves. As of the close, we saw:
- The U.S. Federal Reserve raise the Fed Funds rate by 0.75% – the largest single meeting move since 1994.
- The 10-year Treasury yield climb from 3.05% to almost touch 3.50% then retreat to 3.20%. Canadian yields followed a similar path.
- The S&P 500 fall 6%, 11% in June already.
- Most other major equity indices fall 4-8%.
- Bitcoin fall to just above $20,000, off 30% in a week.
This has been an extremely challenging week for investors, with even treasury bills posting losses.
There are a handful of popular narratives for this accelerated downward pace. The U.S. Consumer Price Index (CPI) – a wide-ranging measure of goods and services prices – didn’t get worse but certainly didn’t show improvement, the market pricing in a more aggressive Fed tightening path and increasing signs of economic weakness are likely the top three. We don’t think any of these are surprises, but when the markets are fragile and jumpy, reactions are dramatic. In this week’s ethos, we will look at all three.
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