This Weekly Financial Market Update reviews the top market headlines: High Inflation Persists in April, U.S. Mortgage Rates Rise to a 13-year High, Consumer Sentiment Falls to Lowest Level in a Decade.

Top Three Market Headlines

High Inflation Persists in April: The U.S. Department of Labor reported last week that the Consumer Price Index (CPI) rose 0.3% in April from March; on an annual (year-over-year) basis, the CPI increased 8.3%, down slightly from 8.5% in March. The "core" CPI, which excludes energy and food costs, registered a 0.6% increase on the month and a 6.2% annual increase. Energy prices were up 30% from the prior year, but actually dipped 2.7% for the month, including a 6.1% drop in gasoline prices. Food prices, on the other hand, continued to accelerate, rising 0.9% on the month and 9.4% on the year—the latter was the largest 12-month increase since April 1981. Meanwhile, the Producer Price Index (PPI) rose 11% in April on an annual basis, its fifth consecutive month with a double-digit gain.

U.S. Mortgage Rates Rise to a 13-year High: The average rate for a 30-year fixed mortgage loan was 5.30% last week, according to Freddie Mac. Up from 5.27% the week before, this rate has now reached its highest point since July of 2009. As interest rates continue to rise—the 10-year Treasury bond yield recently hit 3% for the first time since 2018—mortgage rates are expected to follow the same trend. During what is usually the busiest season for the housing market, higher mortgage rates may pressure on consumers to complete purchases before loans become more expensive, while shutting others out of the housing market entirely.

Consumer Sentiment Falls to Lowest Level in a Decade: The Index of Consumer Sentiment published by the University of Michigan decreased from 65.2 in April to 59.1 in May, the lowest level since 2011 and well below pre-pandemic levels. The index is based on surveys of consumers regarding their outlook on the U.S. economy. Inflation remains top of mind for consumers according to the report, with consumers expecting prices to rise 5.4% over the next year, the highest expected level in over 40 years. Adding to the pressure was decreased confidence from Americans regarding their current financial situation, the reading for which hit its lowest level since 2013.

As of May 16, 2022 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -2.19% -11.34% -16.10% -7.20%
S&P 500 -2.35% -11.03% -15.12% -0.76%
Russell 2000 -2.50% -13.30% -19.83% -16.52%
MSCI EAFE -1.41% -10.40% -15.70% -11.63%
MSCI Emerging Markets -2.60% -11.81% -17.96% -20.56%
FTSE NAREIT -3.15% -11.54% -14.95% 6.56%
Bloomberg Commodity -1.54% 3.24% 29.61% 40.21%
Barclays U.S. Aggregate 0.89% -4.02% -9.71% -8.45%

Bloomberg 5/12/2022, CNBC 5/11/2022 WSJ 5/12/2022, Bureau of Labor Statistics, 5/11/2022, 5/12/2022. Surveys of Consumers – University of Michigan 5/13/2022. 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.