Though the fig tree does not bud
and there is no fruit on the vines,
though the olive crop fails
and the fields produce no food,
though the flocks disappear from the pen
and there are no herds in the stalls,
yet I will celebrate in the Lord;
I will rejoice in the God of my salvation!
Habakkuk 3:17 – 18, CSB
The prophet Habakkuk took a long look at the nation of Judah and was deeply disturbed. He saw a violent culture, filled with egregious sin, strife and contention, paralyzed law and order and those in power perverting justice to their own ends. But instead of preaching to the people, he took his grievances straight to the Lord, asking how long he would watch evil flourish and righteous people suffer before he acted. God’s reply did not bring peace to the prophet: he would send the Babylonians to invade Judah as instruments of his justice. As you might imagine, this did not sit well with Habakkuk. After all, the Babylonians’ wickedness was even worse than Judah’s! He knew that the Babylonian invaders would not discriminate between the righteous followers of Yahweh and those who had abandoned him for wickedness. They would sweep them all up in their nets – righteous and unrighteous. God was seemingly going to compound evil with evil. How would this solve the problem of evil in Habakkuk’s world? God returned with this answer: “I’m not done yet.” He reminded the prophet that he made the earth and everything in it to glorify him and that he was putting everything back the way it was meant to be.
Evil on earth does not mean the absence of God. It’s easy to assume that good can only come to pass if something good produces it. But our God is all-powerful and all-good; he can take evil and work it for good. He allows evil to happen, and somehow, he weaves it into a tapestry that will cover the earth in his glory for our good. For proof, look no further than the cross. An act of unmitigated evil has brought the hope of salvation to billions.
All sorts of bad things may happen, Habakkuk wrote, but he decided to take joy in the all-powerful, all-good God of his salvation. Ultimately, he chose hope in the face of living in an evil world. And so can we.
Global stocks marched upward again in a week marked by multiple central bank rate decisions and a slew of economic data to digest. Much of the market’s upward momentum can be attributed to an in-line rate hike by the Federal Reserve, coupled with what many viewed as dovish comments by Chairman Powell to the press (more on this below). Many market observers also cited technicals as fueling the market’s fire as the S&P 500® 50-day moving average (DMA) crossed above its 200-DMA. This widely followed relationship can portend further strength (and has not been observed in almost two-and-a-half years). Fear-of-missing-out sentiment seemed to permeate traders' mentalities, and short covering pushed the Index to an intraday high of 4,195 (its best level since August). Elsewhere, WTI dropped to just over $73/bbl (roughly where it began the year), and the U.S. 10-year yield ended the week at 3.53% – essentially where it was on Monday – but off from the lows of ~3.35% experienced earlier in the week.
European stocks rallied on the back of hopes that the European Central Bank and Bank of England were nearing the end of their tightening cycles. Both central banks hiked rates by 50 basis points and espoused a data-dependent approach going forward. Chinese equities fell in their first full week of trading after the weeklong Lunar New Year holiday. Nevertheless, the market has rallied by ~11.5% year-to-date. Data-wise, China’s Purchasing Managers’ Index (PMI) rose north of the all-important 50 marker to log a 50.1 reading in January (up from December's 47.0), and the International Monetary Fund raised its annual growth forecast for the country to 5.2% (from 4.4%).
As previously mentioned, the Fed hiked rates by 25 basis points on Thursday, but Powell parted from the written statement during questioning to express an optimistic view that the end of the rate-hiking cycle could be near. While he paid lip service for the need to keep rates higher for longer, the market called his bluff again and rallied on the expectation that a pause would be imminent. Notably, markets clued in on what appeared to be a softening stance towards financial conditions, with Powell seeming to accept looser financial conditions as long as they didn’t feel “unwarranted.”
Then on Friday, the January jobs report showed that nonfarm payrolls increased by a blowout 517,000 (relative to an estimate of 187,000). San Francisco Fed President Mary C. Daly described this as a “wow number.” Shock and awe reverberated across Wall Street as fears for the need of a much more aggressive Fed emerged. Markets reacted by tumbling downward for the day. Yields for the 2-year Treasury jumped 19 basis points while the Fed futures market increased the odds of two more 25 basis point rate hikes but continued to price in roughly two rate cuts this year (which is severely at odds with Fed's communications) on the news.
Furthermore, the Institute for Supply Management services report and the JOLTS report also surprised to the upside. With this slew of data, the U.S. dollar rallied, and multiple economists turned more neutral on the prospects of the USD as the U.S. appeared to be the “cleanest dirty shirt” once again.
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