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Semi-Hawkish Fed Sends Market Lower

Market Data as of Week Ending: 12/16/2022 unless noted otherwise

Equities

U.S. stock prices experienced another volatile week as growing fears over continued monetary tightening pushed the S&P 500 down (-2.05%) for a second consecutive week. Size and style was mixed with large-cap companies generally underperforming their smaller counterparts as growth stocks mostly held up better than their value counterparts. Nearly every major economic sector recorded sharp losses, with the typically defensive healthcare, consumer staples, and utilities sectors faring the best. Energy was the best performing sector, returning 1.78%, as oil prices rebounded on OPEC and IEA’s forecasts for resilient oil demand growth next year. Developed foreign and emerging markets stocks ended the week lower and in line with domestic equities.

Bonds

U.S. Treasury yields moved lower last week as the ‘lower-than-expected’ November U.S. inflation print slightly softened consensus expectations for future rate hikes. The 2-year and 10-year ended the week at 4.59% and 3.59%, respectively, as the 2s10s spread remained near its deepest level of inversion in more than four decades. Returns were negative, but mixed, across the quality and duration spectrum as investment-grade corporate bonds proved most resilient. Yields remained relatively flat for both investment grade corporate and high yield bonds, ending the week at 5.1% and just above 8.5%, respectively.

Macroeconomic Data

Economic data was generally mixed in what was a week dominated by the Federal Reserve’s rate announcement. The week was kicked off with the NFIB smallbusiness index rising to 91.9 in November, showing growing confidence among small-business owners heading into the holiday season. The cost of living rose a meager 0.1% in November, which brought the annual inflation rate to 7.1% from 7.7% in the prior month, suggesting the worst U.S. inflation in 40 years is receding. U.S. retail sales fell 0.6% in November, its biggest decline in almost a year, driven mainly by weak car sales. The Philadelphia Fed manufacturing index improved to a reading of -13.8 in December from -19.4 in the prior month, but was slightly below consensus estimates. The ECB and BOE both raised their key interest rates by 0.5% as both central banks signaled further increases may be required to bring inflation back down to their targets.

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Strong Economic Reports Send Market Lower

Market Data as of Week Ending: 12/9/2022 unless noted otherwise

Equities

U.S. stock prices gave back much of the previous two week’s gains as some surprisingly stronger-than-expected economic data dampened hopes that the Federal Reserve may slow its monetary policy tightening. Large-cap companies outperformed their smaller counterparts as the Russell 200 recorded its worst week since late September, returning -5.06%. Growth stocks endured the brunt of the pain, lagging their value counterparts. All eleven of the major economic sectors ended the week lower, with the typically defensive health care, consumer staples, and utilities sectors faring the best. Energy was the worst performing sector, returning -8.30%, as oil prices plummeted to a one-year low with rising global recession risks weighing on demand expectations. Developed foreign and emerging markets stocks ended the week lower but outperformed domestic equities.

Bonds

U.S. Treasury yields edged higher toward the end of the week, reflecting a hotter-than-expected inflation print and news that China may ease some of its COVIDrelated restrictions. The 2-year and 10-year ended the week at 4.70% and 3.70%, respectively, as the 2s10s spread remained near its deepest level of inversion in more than four decades. Returns were negative, but mixed, across the quality and duration spectrum as investment-grade corporate bonds proved most resilient. Yields rose for both investment grade corporate and high yield bonds, ending the week at 5.2% and just above 8.5%, respectively.

Macroeconomic Data

Economic data was generally better-than-expected in what was a light week. The week was kicked off with the ISM services-sector index rising to 56.5% in November, a strong signal that the economy continues to expand. October factory orders rose 1%, marking the twelfth increase in the past thirteen months. The U.S. producerprice index rose a more-than expected 0.3% in November but is showing steady deceleration at the year-over-year level. The University of Michigan’s consumer sentiment index rose to a preliminary reading of 59.1 in December as inflation concerns appear to be easing. China announced a 10-point guideline for their new COVID prevention and control measures as the country shifts from a zero-COVID policy to reopening.

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Dovish Fed Comments Send Stocks Higher

Market Data as of Week Ending: 12/2/2022 unless noted otherwise

Equities

U.S. stock prices ended the volatile trading week higher as markets rallied on the growing belief that the Federal Reserve may slow the pace of its interest rate hikes. During his speech, Fed Chairman Jerome Powell hinted at the possibility of rates remaining higher for longer but indicated that the pace of rate increases could slow by as early as the mid-December meeting. Growth stocks benefited the most from this rhetoric, outpacing their value counterparts, while mid and small-cap companies generally outperformed their large-sized peers. Nine of the eleven major economic sectors ended the week higher, most notably, the communication services and consumer discretionary sectors while the financials and energy sectors were the worst performing, falling -0.55% and -1.89%, respectively. Developed foreign and emerging markets stocks recorded gains again for the week and generally outperformed domestic equities.

Bonds

U.S. Treasury yields moved lower as dovish Fed commentary suggested their policy rate may be nearing its peak. The 2-year and 10-year ended the week at 4.66% and 3.59%, respectively, as the 2s10s spread reached its deepest level of inversion in more than four decades. Yields dropped for long duration bonds, and once again they significantly outperformed last week with long government bonds being the best performing segment. Yields declined for both investment grade corporate and high yield bonds, ending the week at 5.1% and just above 8.4%, respectively.

Macroeconomic Data

Economic data was once again mixed with Friday’s employment report garnering much of the attention. The week was kicked off with the consumer confidence index falling to a four-month low of 100.2 in November, reflecting growing concern around the economy. The Chicago PMI fell to 37.2 in November, down from 45.2 last month and its lowest level since early 2020. The PCE price index rose a modest 0.3% in October, signaling easing price pressures. Consumer spending rose by 0.5% in October, up from the 0.3% gain in September. The ISM manufacturing data fell to a 30-month low of 49% in November, contracting for the first time since the onset of the pandemic. The U.S. added 263,000 new jobs in November, a surprisingly strong report that reflects the strength of the labor market. Inflation in the Eurozone slowed for the first time in 17 months, falling 0.6% to 10.0% in November as energy costs eased.

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EdgeCo Holdings Announces Launch of AmericanTCS

 

The new brand brings together the Trust, Custody and Retirement operations EdgeCo has acquired over the past four years under a single banner.

 

EdgeCo Holdings, LP (“EdgeCo”) is pleased to announce the launch of AmericanTCSSM, aligning the trust, custody and retirement operations EdgeCo has acquired since 2018 under a single brand. The units that comprise AmericanTCS currently custody approximately $120 billion in assets, service over 300,000 retirement plans with more than 6 million participants, support over 10,000 unaffiliated financial advisors, and more than 420 benefits administrators. The operations under the newly formed AmericanTCS division include:  

  • Mid Atlantic Trust Company, is a Trust & Custody solution for benefits administrators and financial institutions, currently provides services to over 200 industry partners. The company offers an innovative set of portfolio tools and conflict-free investment products that not only save benefits administrators time and expense in managing existing plans but also provide features that will help win new business.   
  • American Trust Retirement, which represents both AT Retirement Services, LLC and American Trust Company, is a full-service retirement plan provider and fiduciary focused on the retirement market.  We service plan sponsors and retirement plan investors directly and through our relationships with other financial intermediaries.  
  • American Trust Wealth, serves individual and institutional investors. through a broad suite of financial services within a sound fiduciary environment.  
  • AmericanTCS Technology provides workflow automation solutions through its PensionPro software and trading solutions for retirement providers, including third-party administrators (TPA) and custodians, through its VMS Hub service, which is being rebranded to Hub+SM.   

EdgeCo Holdings CEO, Paul Schneider, explained the mission behind AmericanTCS, “Nearly 57 million people don’t have a traditional pension or retirement savings plan. That’s nearly half of working-age Americans.” Mr. Schneider continued, “Our mission at AmericanTCS is to help solve for that by creating financial security for all Americans by bringing together industry-leading technology, investment solutions and, most importantly, people with deep experience in the retirement industry that are simply focused on helping our partners create better participant outcomes.”    

The AmericanTCS model is built upon the foundation of Mid Atlantic Trust Company, an industry-leading Trust & Custody solution. That cornerstone of trust and custody services has been married with software and trading solutions the firm has added through acquisitions of PensionPro in 2021 and VMSHub in 2022. These services at a high level allow retirement providers to manage projects, optimize trade flows, and analyze profitability while providing tools and solutions that enhance the advisor-client relationship.   

Additionally, for retirement providers looking for support in navigating the increasingly challenging environment of today’s complex retirement market, AmericanTCS can assume a range of administrative and operational responsibilities.  

“These are exciting times to be a part of our company” commented Tim Friday, Mid Atlantic Trust Company CEO and President of EdgeCo Holdings. “The pieces of the puzzle we have been working towards over the last four years are finally coming together. Bringing the trust and retirement division under one brand will allow us to better support our recordkeeping and investment management partners with the shared resources we now have, while still offering the same great service everyone’s come to know.”  

About AmericanTCSSM 

AmericanTCS and its businesses collectively date back almost 40 years and provide industry-leading financial services to the American workforce. Through its businesses, AmericanTCS delivers a wide array of custody and trust, retirement services, wealth management, and technology software automation to a diverse national client base. With over $120 billion in assets custodied, $17 billion in recordkeeping assets, and $1.6 billion under wealth management and fiduciary services, all of the operations that comprise AmericanTCS share a common mission: to create financial security for all Americans. To learn more visit www.americantcs.com.  

About EdgeCo Holdings 

Through its AmericanTCS and NewEdge Capital Group divisions, EdgeCo Holdings is a premier provider of best-in-class, technology-enabled solutions for financial intermediaries and their clients. For over four decades, EdgeCo companies have provided a suite of technology and support services, including full-service retirement plan administration, brokerage, advisory, and trust and custody services to a diverse national client base of financial intermediaries. This client base includes registered representatives, investment advisors and other financial intermediaries, including retirement plan recordkeepers, TPAs, bank trust departments, broker dealers and insurance companies. EdgeCo Holdings currently services approximately $150 billion in client assets under custody or administration and more than 10,000 financial advisors and 500 financial institutions.  

Media Contact 

Christopher Broussard 
Chief Marketing Officer 
800-693-7800 x271  

Stocks Rise as the Fed Considers Lower Rate Hikes

Market Data as of Week Ending: 11/25/2022 unless noted otherwise

Equities

U.S. stock prices rose last week as the Fed noted that they will consider slowing the pace of interest rate hikes at the next meeting in December. Third quarter earnings growth for the S&P 500 will finish just above 2%; however, expectations for earnings growth in the fourth quarter have flipped from a gain of nearly 4% on September 30th to a decline of more than 2%. Investors continued to show a preference for value versus growth stocks and results by size were more mixed as mid cap companies outperformed their small and large-sized peers. All the major economic sectors ended the week higher, most notably, the utilities and materials sectors which were both up around 3%. Energy stocks were the worst performing sector with only modest gains as the price of crude oil dropped below $80/barrel for the first time since September. Developed foreign and emerging markets stocks recorded gains again for the week and generally outperformed domestic equities.

Bonds

U.S. Treasury yields were generally lower as the 10-year ended the week at 3.78% and the 2-year edged up to 4.74%. Yields dropped for long duration bonds, and once again, they significantly outperformed last week. Long investment grade corporate bonds were the best performing segment; however, high yield corporate bonds were the best performing segment among intermediate term bonds. Yields declined for both investment grade corporate and high yield bonds, ending the week at 5.3% and just above 8.6%, respectively.

Macroeconomic Data

Economic data was once again mixed with some positive surprises from the durable goods and new home sales reports. For the month of October, durable goods orders increased 1% and we finally had some good news from housing as sales of new single-family homes surprised to the upside with 632,000. According to the flash PMI data from S&P, demand conditions are worsening as both the services and manufacturing sectors are in contractionary territory. S&P reports that new orders across the private sector have dropped to their lowest level in more than two years. Initial jobless claims rose by 17,000 to 240,000 last week but the job market remains tight as demand for workers remains elevated. PMI data for Europe narrowly improved but also remains in contractionary territory.

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Stock Prices Declined as Investor Sentiment Shifts

Market Data as of Week Ending: 11/18/2022 unless noted otherwise

Equities

U.S. stock prices declined last week as investor sentiment shifted on mixed economic data. Third quarter earnings results were generally better than expected with 69% of S&P 500 companies reporting a positive earnings surprise and growth of just above 2%. However, according to FactSet, expectations for earnings growth in the fourth quarter have flipped from a gain of nearly 4% on September 30th to a decline of more than 2%. Value stocks rotated back into favor while large companies generally outperformed their small and mid-sized peers. Most of the major economic sectors ended the week lower, most notably, the consumer discretionary sector where mega cap stocks such as Amazon and Tesla struggled. Traditionally defensive sectors including utilities, consumer staples, and health care were the only sectors to generate gains for the week. Developed foreign and emerging markets stocks recorded gains again for the week and generally outperformed domestic
equities.

Bonds

U.S. Treasury yields were mixed across the curve as the difference between the 2-year and 10-year U.S. Treasury yield declined to its lowest level in over 40 years. The 10-year narrowly increased to end the week at 3.93% and the 2-year increased to 4.72%. Yields dropped for long duration bonds, and they significantly outperformed last week. Long investment grade corporate bonds were the best performing segment; however, high yield corporate bonds were the best performing segment among intermediate term bonds. Yields declined for both investment grade corporate and high yield bonds, ending the week at 5.5% and just above 8.8%,
respectively.

Macroeconomic Data

Economic data was mixed with notable strength in the retail sales report, a resilient labor market, and continued weakness in housing. Retail sales increased 1.3% in October, in a show of strength across a broad variety of goods and services despite nearly a four-decade-high inflation rate. After adjusting for inflation, sales still rose 0.8% and a core measure that excludes sales on gas, food, autos, and materials, also rose 0.7%. Demand for labor remains robust as the weekly initial jobless claims decreased by 4,000 to 222,000 and further complicates central bank policy decision making in December. Existing home sales declined for a ninth straight month in October, the longest streak of declines on record according to the National Association of Realtors. Peak inflation has not reached the U.K. as they reported a sharp increase of 11.1% in October, its highest level in more than 40 years.

 

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Stock Prices Surged on Inflation Data

Market Data as of Week Ending: 11/11/2022 unless noted otherwise

Equities

U.S. stock prices surged last week as investor sentiment improved with the most recent inflation data. Third quarter earnings results have been better than expected with 69% of S&P 500 companies reporting a positive earnings surprise. Growth stocks rotated back into favor while small and mid-sized companies generally lagged their large cap peers. All eleven major economic sectors ended the week with gains, most notably in the communication services and information technology sectors. Traditionally defensive sectors including utilities, consumer staples, and health care lagged, but still delivered modest gains. Developed foreign and emerging markets stocks recorded gains again for the week and generally outperformed domestic equities as foreign currencies strengthened relative to the U.S. dollar.

Bonds

U.S. Treasury yields fell sharply in response to the CPI report that came in lower than expected. The 10-year U.S. Treasury yield decreased to end the week at 3.88% and the 2-year declined to 4.58%. Long duration significantly outperformed last week as all segments across the bond market recorded gains. Investment grade corporate bonds generally outperformed, despite the risk-on sentiment which typically favors high yield bonds. Yields declined for both investment grade corporate and high yield bonds, finishing the week at 5.6% and just below 9.0 %, respectively.

Macroeconomic Data

It was a lighter week for economic data, yet investors were fixated on the U.S. Labor Department’s Consumer Price Index (CPI), which is broadly used to measure inflation. The report was better than expected as the headline one-year growth rate decelerated to 7.7% in October. Investors celebrated that figure as it was the lowest rate since January and the monthly change was only 0.4%. Core inflation, excluding food and energy, also came in lower at 0.3% for the month of October but remains elevated at 6.3%, compared to the same period one year ago. Prices for used vehicles and medical care declined while housing, especially rents, remain elevated. There were some results that were disappointments. Consumer sentiment unexpectedly fell from 59.5 to 54.7, its lowest level since July. Initial jobless increased by 7,000 to 225,000; however, that figure represents a strong labor market despite the Fed’s attempt to reduce demand for labor. In China, exports dropped 0.3% last month which was well below the 4.3% increase that was expected and the first decline since early in the pandemic.

 

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Markets Sent Lower on Hawkish Sentiment and Mixed Jobs Report

Market Data as of Week Ending: 11/04/2022 unless noted otherwise

Equities

U.S. stock prices declined last week as hawkish sentiment from Fed Chairman Powell’s press conference dashed hopes for an impending pivot in monetary policy. Third quarter earnings results continue to come in above estimates with 85% of S&P 500 companies now reported. Multiple sectors saw positive earnings surprises last week, most notably, health care and energy. Small and mid-sized companies generally outperformed their large cap peers, while the growth factor was a headwind for the second straight week. Eight of the eleven sectors ended the week lower as the communication services and information technology sectors lagged. The energy, materials, and industrial sectors were able to eke out a gain. Developed foreign and emerging markets stocks recorded a gain for the week, outperforming domestic equities by a wide margin.

Bonds

U.S. Treasury yields rose as the Fed and Bank of England each announced a 0.75% interest rate hike. The 10-year U.S. Treasury yield increased to end the week at 4.25%, while the 2-year yield rose to 4.73%, its highest level since July 2007. Long duration lagged last week as all segments across the bond market recorded losses. Investment grade corporate bonds outperformed across the board last week. Yields rose for both investment grade corporate and high yield bonds, finishing the week at nearly 6.0% and 9.2%, respectively.

Macroeconomic Data

Economic reports were mixed for the week as the labor market provided a mixed picture. The Chicago PMI dropped to 45.2 in October, the second straight month of contraction. Manufacturing data was slightly better than expected but continued its fall as the ISM manufacturing index slipped to 50.2 from 50.9 in October, just above the breakeven level and its lowest level since May 2020. The ISM services index fell to 54.4 in October as the U.S. services industry grew at its slowest pace in nearly 2-1/2 years, due to higher prices. U.S. factory orders rose 0.3% in September as defense and aircraft spending rose. The U.S. added a surprisingly strong 261,000 new jobs in October, outpacing estimates and underscoring the strength of the labor market. However, the U.S. unemployment rate rose to 3.7% from 3.5% as more people lost jobs and the size of the labor market shrunk. The Bank of England (BoE) increased rates by 0.75% to 3%, marking its highest level since 2008, to battle inflation that is predicted to stay above 10% for the next six months and above 5% in 2023.

 

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Stock Prices Rise as Investor Sentiment Improves

Market Data as of Week Ending: 10/28/2022 unless noted otherwise

Equities

U.S. stock prices advanced last week as investor sentiment improved for risk assets. Investors have been concerned that companies would report less favorable earnings and analysts would be forced to lower expectations for growth next year. However, third quarter results have been largely in-line with expectations at around 2% growth and 71% of companies in the S&P 500 reporting earnings above estimates. It is worth noting that according to FactSet, if the energy sector is excluded, the S&P 500 would be reporting a 5.1% decline in earnings. Small and mid-sized companies generally outperformed their large cap peers, while the growth factor was a headwind. Ten of the eleven sectors recorded gains with the communication services sector as the only outlier due to large drawdowns from Alphabet (parent of Google), and especially Meta Platforms (parent of Facebook). Developed foreign and emerging markets stock prices ended the week mixed with results as emerging markets finished the week in negative territory.

Bonds

U.S. Treasury yields declined as foreign central banks attempt to join the Federal Reserve in a more aggressive approach to reduce inflation. The 10-year U.S. Treasury declined and ended the week at 4.11%, while the 2-year yield was unchanged and remained at 4.55%. Long duration outperformed last week as all segments across the bond market recorded gains. High yield corporate bonds generally outperformed with the only exception among long duration, where investment grade took the top spot. Yields declined for both investment grade corporate and high yield bonds, finishing the week at nearly 5.9% and 9.0%, respectively.

Macroeconomic Data

Economic growth, as measured by gross domestic product (GDP), came in better than expected at 2.6% after adjusting for inflation. This was the first positive result for the year, bolstered by exports of oil and natural gas as supplies have been disrupted in Europe. Inflation has been persistently high, but wages have also increased and were reported at 5% higher, according to the employment cost index. Consumer spending has increased due in part to higher prices, but even after adjusting for inflation, spending increased 0.3% in September compared to one year ago. Housing continues to be a problem for economic growth as a flurry of negative reports came through this week. Inside the third quarter GDP report, residential investment fell at a 26% annual rate during the third quarter. Pending home sales declined more than 10% in September, the largest drawdown since the pandemic and prices declined for the second consecutive month in August, according to the S&P Case-Shiller Index. The European Central Bank (ECB) increased rates by 0.75% for the second consecutive meeting and noted that further increases may be necessary to reduce inflation.

 

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Stocks Regain Footing as Investors Look to Earnings and Fed

Market Data as of Week Ending: 10/21/2022 unless noted otherwise

Equities

U.S. stock prices regained traction as investors reacted positively to some prominent earnings reports and signs that the Federal Reserve might slow its pace of interest rate hikes. The S&P 500 ended the week 4.75% higher. Reversing its trend, large-cap companies generally outperformed their mid and small-sized peers, while the value factor was a headwind. All eleven sectors recorded gains with the energy sector leading the way on the announcement of a release from the U.S. Strategic Petroleum Reserve. Traditionally defensive sectors in health care, utilities and consumer staples lagged. Developed foreign and emerging stock prices ended the week slightly higher, but underperformed the U.S.

Bonds

U.S. Treasury yields continued their rise as mixed reports kept volatility in the market. The 10-year U.S. Treasury ended the week at 4.29%, while the 2-year yield increased by 0.05% to 4.55% as several Fed officials made comments suggesting a higher-than-expected fed funds target rate. Short duration outperformed last week as longer duration bonds were negative across the board with government bonds faring the worst. High yield corporate bonds were the best performing asset class as its yield declined from 9.7% to 9.6%, while yields on investment grade corporate bonds rose to 6.1%.

Macroeconomic Data

It was a light week for economic data releases as it was kicked off on Monday with a negative New York Fed’s Empire State business index reading. The index fell 7.6 points to -9.1 in what was the third straight negative reading – any reading below zero indicates deteriorating conditions. The U.S. industrial production index rose 0.4% in September, helped by the increase in oil and gas drilling and uptick in auto production. The NAHB confidence index fell to 38 in October, falling for a record tenth month in a row as home builders say the situation is unhealthy and unsustainable. The Philadelphia Fed’s manufacturing index edged up slightly to -8.7 in October from -9.9 but was below analyst estimates. The U.S. leading economic index fell 0.4% in September, marking the seventh decline in nine months and suggesting an increasing likelihood of a recession before year-end. The new U.K. Prime Minister, Liz Truss, resigned last week after roughly six weeks in office.

 

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