This Weekly Financial Markets Update reviews the top market headlines: Fed Steps Up Rate Hikes, 10-Year U.S. Treasury Bond Yield Hits 11-Year High, Retails Sales Fall in May

Top Three Market Headlines

Fed Steps Up Rate Hikes: The Federal Reserve last week raised its short-term interest rate benchmark (the federal-funds rate) by 0.75%, putting the current target range for the policy rate at 1.50% to 1.75%. This was the Fed's third rate hike this year and the largest one-time increase in over 25 years, as the central bank adopts a more aggressive stance towards fighting stubbornly high inflation. The Fed also indicated that more rate hikes are forthcoming, as the median 2022 and 2023 fed funds rate projections by Fed bankers jumped to 3.4% and 3.8%, respectively.

10-Year U.S. Treasury Bond Yield Hits 11-Year High: The marketplace yield on 10-year U.S. Treasury bonds hit 3.48% last Tuesday, the highest level since April 2011. The 10-year bond's yield has more than doubled this year from a starting point of 1.51%. Yields on Treasury bonds of all maturities have risen dramatically this year amid expectations of interest rate increases orchestrated by the Federal Reserve in response to rising inflation. The largest increases have occurred in short-term bonds: the 2-year Treasury bond, for instance, closed last week at 3.19%, almost two-and-a-half percentage points above its level at the start of the year and its highest level since December 2007.

Retail Sales Fall in May: The Commerce Department reported last week that sales at retail and food establishments declined by 0.3% in May versus April, the first monthly decline in five months. Consumers pulled back from large-ticket items in May, as declines were registered in auto sales (-3.5%), electronics & appliances (-1.3%), and furniture (-0.9%). One of the few business types seeing a sales increase in the month was gasoline stations (+4.0%), which reflected higher gasoline prices. On an annual (year-over-year) basis, retail sales in May rose 8.1%, but after excluding the effects of price increases, the amount of real, or inflation-adjusted, retail sales was likely much more subdued over this period.

As of June 21, 2022 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -5.73% -17.46% -21.88% -16.91%
S&P 500 -5.75% -18.59% -22.33% -11.68%
Russell 2000 -7.43% -19.30% -25.37% -26.33%
MSCI EAFE -5.73% -15.64% -20.63% -20.36%
MSCI Emerging Markets -4.67% -11.43% -17.61% -24.51%
FTSE NAREIT -4.61% -20.08% -23.16% -10.94%
Bloomberg Commodity -6.37% 2.11% 28.20% 41.14%
Barclays U.S. Aggregate -0.92% -5.89% -11.48% -11.15%

WSJ 6/15/2022, Marketwatch 6/15/2022; WSJ 6/14/2022, U.S. Census Bureau 6/15/2022; U.S. EIA 6/17/2022. 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.