This Weekly Financial Markets Update reviews the top market headlines: ECB Enacts First Rate Increase Since 2011, Leading Indicators Decline for the Fourth Straight Month, U.S. Housing Market Activity Cools.

Top Three Market Headlines

ECB Enacts First Rate Increase Since 2011: The European Central Bank (ECB) last week raised its key policy interest rate for the first time since 2011. The half-percentage point increase brings the deposit facility rate — which defines the interest banks receive for depositing money with the central bank overnight — back to zero after years of being negative. This motion puts the ECB in line with other central banks, such as the Federal Reserve, that have also increased policy rates to try and combat rising inflation. By the end of the year, investors expect that the ECB will raise the rate further to 1.0%.

Leading Indicators Decline for the Fourth Straight Month: The Conference Board announced last week that its Leading Economic Index (LEI), a composite of ten U.S. economic indicators intended to signal turning points in the economy, decreased by 0.8% in June. This was the fourth consecutive month the index has declined. Over the full first half of 2022, the LEI declined 1.8% compared to the prior year, as compared to a 3.3% growth rate in the second half of 2021. According to the Conference Board, key factors driving the index's decline in June included consumer pessimism about future business conditions, moderating labor market conditions, falling stock prices, and weaker manufacturing new orders.

U.S. Housing Market Activity Cools: Data released last week provided further evidence of slowing housing market activity as mortgage rates have risen. Existing home sales in June fell 5.4% from the prior month to a seasonally adjusted annual rate (SAAR) of 5.12 million units; this was the fifth straight monthly decline, and represented a drop of more than 20% from the level of sales in January. In addition, the number of housing starts dropped in June for the second consecutive month, and the number of building permits issued for new housing units, an indicator of future construction activity, fell 8.1% to an annual rate of 982,000 — the first time this figure has dropped below the one million mark in two years.

As of July 25, 2022 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 3.19% 3.60% -17.31% -13.13%
S&P 500 2.57% 4.73% -16.17% -7.95%
Russell 2000 3.59% 5.84% -18.96% -16.85%
MSCI EAFE 4.43% 2.81% -17.31% -15.24%
MSCI Emerging Markets 3.00% -0.65% -18.16% -23.28%
FTSE NAREIT 3.32% 3.87% -17.11% -6.07%
Bloomberg Commodity 2.74% -0.32% 18.05% 22.61%
Barclays U.S. Aggregate 1.17% 1.79% -8.74% -9.57%

National Association of Realtors 7/19/2022, WSJ 7/22/2022, The Conference Board, 7/21/2022. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Gallagher Fiduciary Advisors, LLC ("GFA") is an SEC Registered Investment Adviser that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Securities may be offered through Triad Advisors, LLC ("Triad"), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad, Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.