This Weekly Financial Markets Update reviews the top market headlines: Elevated Inflation Persists in January, Retail Sales Rebound, Treasury Bill Yields Hit 5%

Top Three Market Headlines

Elevated Inflation Persists in January: The U.S. Department of Labor reported last week that the Consumer Price Index rose 0.5% in January over the prior month, an accelerated pace from the 0.1% monthly increase reported in December. On an annualized basis, prices rose 6.4%, a modest decline from 6.5% in December. Rising shelter costs accounted for a large portion of the increase in January, with food, gasoline, and natural gas being top contributors as well. The core CPI, which excludes energy and food prices, rose by 0.4% over the month, consistent with December's pace, which put the annual increase at 5.6%, compared to 5.7% in December.

Retail Sales Rebound: After slumping in the final months of 2022, retail sales recovered in January, according to a report issued last week from the U.S. Department of Commerce. Total sales at retail and food services establishments rose 3.0% in January from December, the strongest monthly increase since March 2021. The gains offset declines of 1.1% in each of the prior two months. Sales grew in a variety of categories, with vehicles, restaurants, and furniture showing the strongest advances. Compared to the prior year, sales in January rose 6.4%, which includes the effect of rising prices over this period.

Treasury Bill Yields Hit 5%: For the first time since 2007, market yields on 6-month and 1-year Treasury bills surpassed 5% last week. The 6-month bill yield, which settled at 5.03% at week's end, has surged from 0.19% at the end of 2021, while the 1-year bill yield has jumped from 0.38% to 5.07% over the same period. The dramatic increases have occurred as the Federal Reserve has hiked the federal funds rate eight times in the last 12 months in an effort to combat inflation. Yields across all Treasury bond maturities have increased this month, erasing late-2022 declines, as investors recalibrate inflation and rate expectations amid recent stronger-than-expected reports on jobs and inflation.

As of February 21, 2023 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World -0.24% 6.70% 6.70% -7.42%
S&P 500 -0.20% 6.50% 6.50% -5.29%
Russell 2000 1.47% 10.65% 10.65% -2.63%
MSCI EAFE 0.12% 7.47% 7.47% -4.91%
MSCI Emerging Markets -1.38% 4.58% 4.58% -17.24%
FTSE NAREIT Equity -0.75% 8.95% 8.95% -8.79%
Bloomberg Commodity -1.88% -4.97% -4.97% -1.93%
Barclays U.S. Aggregate -0.47% 1.07% 1.07% -8.56%

US Dept. of Labor, 02/14/2023, Barron's 2/14/2023, US Census Bureau 2/15/2023. 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.