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Stock Prices Move Higher as Inflation Cools

Market Data as of Week Ending: 1/27/2023 unless noted otherwise

Equities

U.S. stock prices moved higher as investor sentiment has improved, despite a weaker outlook for the business cycle. The estimated earnings decline for the fourth quarter has expanded to -5.0% and most of the companies that provide guidance have projected lower estimates for the first quarter. Growth stocks once again outperformed their value-oriented counterparts, while the size factor was more mixed, but large-sized companies generally outperformed small and mid-sized peers. Nine of the economic sectors delivered gains with notable strength in the consumer discretionary, information technology, and communication services sectors. Traditionally defensive sectors lagged with declines in the healthcare and consumer staples sectors. Developed foreign and emerging markets stocks ended the week with gains for the fourth consecutive week; however, relative performance in both markets lagged domestic equities.

Bonds

U.S. Treasury yields were mixed as yields edged higher for short to intermediate term bonds and the 10-year ended the week at 3.52%. New economic data did not change investor expectations, which remain confident that the Fed will slow the pace of interest rate increases to 0.25%, at the upcoming meeting. Returns were mixed across the quality and duration spectrum as long duration corporate bonds were the best performing segment. Yields were largely unchanged for investment grade corporate bonds and some spread tightening was observed for high yield bonds, ending the week at 5.0% and nearly 8.2%, respectively.

Macroeconomic Data

Economic data came in mixed with better-than-expected inflation data showing signs of deceleration and solid economic growth, despite recent declines in consumer spending and a weak outlook according to survey data. The PCE index showed that headline inflation slowed to 5.0% and the core measure (excluding food and energy prices) dropped to 4.4%, its lowest increase since October 2021. Economic growth, as measured by GDP, increased 2.9% in the fourth quarter and 2.1% for the calendar year 2022. The bad news was that consumer spending fell in December for the second consecutive month, despite lower prices. According to S&P Global, the outlook for economic growth has improved, but the flash composite PMI is still pointing toward a contraction with a 46.6 reading. The outlook in Europe is starting to improve as business confidence increased and the flash composite PMI improved to 50.2, showing signs of optimism for the first time since June of last year.

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Stock Prices Mixed as Economy Weakens

Market Data as of Week Ending: 1/20/2023 unless noted otherwise

Equities

U.S. stock prices settled back in with mixed results across major indexes. We are still early into reporting season (only 11% of companies in the S&P 500 reported), but the estimated earnings decline has expanded to -4.6%. The trend of growth stocks outperforming their value-oriented counterparts continued, but smaller-sized companies lost some of their appeal and lagged their mid and large-sized peers. Performance across economic sectors was mixed with some gains in the consumer discretionary, information technology, and energy sectors. The rest of the sectors were down with notable weakness in the industrials, utilities, and consumer staples sectors. Developed foreign and emerging markets stocks ended the week with gains for the third consecutive week as both markets finished ahead of domestic equities.

Bonds

U.S. Treasury yields were also mixed with lower yields for short to intermediate term bonds and higher yields for long duration bonds. The 10-year ended the week at 3.48% as investors were delivered strong signals from the Fed that they are on course to reduce the pace of interest rate hikes again. According to CME, futures pricing indicates a 99% probability of a 0.25% interest rate hike at the upcoming meeting. Returns were mixed across the quality and duration spectrum as investment grade corporate bonds were the best performing segment. Yields were largely unchanged for investment grade corporate bonds and some spread widening for high yield bonds, ending the week at 5.0% and nearly 8.3%, respectively.

Macroeconomic Data

Economic data came in generally worse than expected as both retail sales and industrial production fell in the month of December. Retail sales declined -1.1% in December as holiday sales were disappointing despite heavy discounting by retailers to clear inventory. Industrial production declined for the second consecutive month in December (-0.7%) as higher interest rates and prices weighed on demand. The housing market remains challenged with declines in both new and existing home sales, but results for December were better than expected. Initial jobless claims dropped below 200,000 as the labor market remains robust with 10.5 million job openings and 3.5% unemployment. European leaders at the ECB and BoE remain committed to fighting inflation with higher rates while signs are emerging that inflation may be on the rise in Japan.

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Stock Prices Gain as Inflation Cools

Market Data as of Week Ending: 1/13/2023 unless noted otherwise

Equities

U.S. stock prices rose again in the second week of the year as investors digested a softer inflation report and companies begin to report fourth quarter results. Consensus expectations for the companies in the S&P 500 have narrowly improved to an estimated earnings decline of -3.9%, however, investors will also be focused on forward guidance and underlying business fundamentals. Growth stocks outperformed their value oriented counterparts and small-sized companies outshined both their mid and large-sized peers. Most of the major economic sectors were up for the week with two traditionally defensive sectors, consumer staples, and health care, as the only exceptions. Developed foreign and emerging markets stocks ended the week with solid gains as both markets finished ahead of domestic equities.

Bonds

U.S. Treasury yields fell across the curve as the 10-year ended the week at 3.49% as investors have been embracing a barbelled approach of equity risk and high quality bonds. The front-end of the yield curve was effectively unchanged as the 2-year finished around where it started and the 2-10 spread remains in negative territory at -0.73%. Returns were positive across the quality and duration spectrum as long duration corporate bonds were the best performing segment. Yields declined for both investment grade corporate and high yield bonds, ending the week at 5.0% and just below 8.2%, respectively.

Macroeconomic Data

Economic data came in generally better than expected as all eyes were concentrated on the inflation report and what that may mean for the upcoming Fed decision. The December headline Consumer Price Inflation (CPI) dropped for the sixth consecutive month, when measured on a year-over-year basis, and fell for the first time since May 2020, when compared to the previous month. Core CPI (excluding food and energy) slowed to 5.7% as goods prices declined but prices remain buoyed by strength in shelter and services. Initial jobless claims fell for the first week of the year to 205,000 as the labor market remains robust with 10.5 million job openings and 3.5% unemployment. The World Bank cut its estimate of global growth from 3.0% down to 1.7%, citing high inflation, rising borrowing costs, reduced investment spending, disruptions in China, and Russia’s invasion of Ukraine as key detractors.

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Stocks Respond Favorably to Mixed Economic Data

Market Data as of Week Ending: 1/6/2023 unless noted otherwise

Equities

U.S. stock prices regained their footing as most major indexes ended in positive territory for the first week of the year. Stocks responded favorably to economic reports that support a less restrictive stance from the Federal Reserve. Value stocks outperformed their growth oriented counterparts and mid-sized companies outshined both their larger and smaller sized peers. Most of the major economic sectors were up for the week with health care as the only exception, ending the week with a modest loss. Analyst expectations have been lowered over the past several weeks as the consensus estimate for fourth quarter earnings growth has been reduced to -4.1%. Developed foreign and emerging markets stocks ended the week with solid gains as both markets finished ahead of domestic equities.

Bonds

Intermediate and long-term U.S. Treasury yields dropped sharply on Friday as the 10-year ended the week more than 0.30% lower at 3.63%. The front-end of the yield curve was effectively unchanged as the 2-year finished around where it started the year at 4.70%. Returns were positive across the quality and duration spectrum as long duration government bonds were the best performing segment. Yields moved lower for both investment grade corporate and high yield bonds, ending the week at 5.2% and just below 8.5%, respectively

Macroeconomic Data

Economic data were generally mixed with investors focused on employment reports and Fed minutes. Job openings were essentially unchanged in November ending the month at 10.5 million and unemployment slowed to 3.5% in December. Hiring and wage gains are starting to decelerate which should support a reduction in the pace of rate increases from the Fed. Minutes from the Federal Reserve meeting in December show that committee members are concerned about easing in financial conditions absent a significant reduction in inflation. Services PMI data from both ISM and S&P point toward contractionary territory as new orders fell again in December. Manufacturing PMI data is also below the 50 level with weaker demand and slower output. In Europe, inflation fell below 10% for the first time in two months as lower energy prices brought the figure down to a 9.2% annual increase.

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Stocks Prices End the Year Down as Investors Grappled with Higher Interest Rates and a Slowing Economy

Market Data as of Week Ending: 12/30/2022 unless noted otherwise

Equities

U.S. stock prices finished with modest losses for the final week of the year. The S&P 500 closed out the year down more than 18% as investors grappled with higher interest rates and a slowing economy. Size and style were mixed for the week, but for the year, the value factor significantly outperformed growth and mid-sized companies outshined both their larger and smaller-sized counterparts. Most of the major economic sectors were down for the week; however, financials and energy were exceptions with modest gains of less than 1%. For the year, sector dispersion was wide as communication services and consumer discretionary sectors were down more than 35% while energy stocks were up more than 65%, despite only a modest rise in oil prices. Developed foreign and emerging markets stocks ended the week with small gains as the dollar weakened throughout the quarter and developed foreign stocks finished the year ahead of domestic equities.

Bonds

U.S. Treasury yields moved higher last week as the 10-year reached its highest level since the middle of November. The 2-year and 10-year ended the year at 4.71% and 3.97%, respectively, as the spread narrowed yet still is near its widest level of inversion over the last four decades. Returns were negative, but mixed, across the quality and duration spectrum as short duration investment-grade corporate bonds proved most resilient. Yields moved higher for both investment grade corporate and high yield bonds, ending the year at 5.4% and just below 9.0%, respectively.

Macroeconomic Data

Economic data was light for the week with only a few reports that were generally better than expected. According to S&P, CoreLogic home prices declined for the fourth consecutive month, down 0.5% in October. Despite recent softness, the Case-Shiller National Home Price Index rose 9.2% compared to the same period last year. Weekly initial jobless claims increased by 9,000 to 225,000, which was in line with consensus and only slightly above the pre-pandemic levels in 2019. The number of available jobs has been declining with 10.3 million as of October; however, that far exceeds the 6.1 million unemployed people seeking work. In Asia, China announced plans to lift almost all standard COVID restrictions and that the government will boost fiscal expenditures next year to support economic growth.

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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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