The S&P 500 was down 3.8% on the week. Small caps fared slightly better and the NASDAQ slightly worse. As has been customary in recent market corrections, foreign developed markets exhibited a smaller downside move. The MSCI EAFE Index was down 0.9% on the week.
Core fixed income was down 0.8% on the week as the rise in yields has become significant. Better economic data caused the fixed income market to remove the cuts they had previously forecasted. It was controversial at the time, and many said the bond market must be right. Instead, the bond market has moved yields closer to the Fed’s initial target path.
There were some who thought the bond market would remove the implied cuts, but this was often accompanied by a bearish outlook on equity markets as it unfolded. The 2-year Treasury was down 60 basis points from October to early February. Since then, the entire drop has been removed and this week the 2-year Treasury closed at a 15-year high at 4.72%. The S&P 500 rallied more than 17% off its October low and has since pulled back 4.4%. The net result is the index is still up more than 12% despite the retracement in fixed income yields.