Weekly Macro Minute

GuideStone Reflections

On the day of the Lord’s sacrifice

I will punish the officials, the king’s sons,

and all who are dressed in foreign clothing.

Zephaniah 1:8 (CSB)

This is the Lord’s warning through the prophet Zephaniah to the leaders of Judah. Now, a sense of style seems like the least of the things for which to punish someone. So, what did the Lord have against “foreign clothes”? Nothing at all, really. The problem wasn’t the outfits but the heart that beat underneath them. Zephaniah meant that the Israelites’ following the fashion styles of the neighboring nations around them reflected their core problem: they were becoming increasingly pagan-like in their lifestyles and, worst of all, their worship. To get along with the more powerful cultures surrounding them, the leadership of Judah led the nation in a slow program of cultural accommodation. The Israelites were supposed to be God’s light to the nations. But they made little compromises, one after another, until finally, they were indistinguishable from any other pagan people in the Ancient Near East. Little accommodations to get along, as innocent as they may have seemed, led to full-blown assimilation.

In Matthew 5:14, Jesus says, “You are the light of the world.” Light does not blend in, but instead, it diffuses and spreads. The Lord did not call Christians to withdraw from the culture at large, but on the other hand, He didn’t tell us to blend in, either. He calls us to reflect the cross, not the culture. Christians who accommodate to the world will eventually be assimilated into the world.

In what ways do we look like the world around us? Are we wearing foreign clothes?

Across the Markets

Global markets fell for the week on light economic releases and ongoing anxiety about the direction of growth, inflation, and central bank action. Within the S&P 500®, energy shares were the only sector that saw positive performance (up over 5%), while the brunt of the drawdown occurred within the communications services sector. The Artificial Intelligence (AI) arms race intensified as Google rolled out its rival to OpenAI’s ChatGPT. But a faulty debut led to a $100 billion loss in its parent company's stock (Alphabet) on Wednesday, and the shares ended down 10% for the week.

While speaking at an economic conference on Tuesday, Federal Reserve Chairman Powell repeated his earlier statements regarding disinflation beginning to take hold, which sent markets decidedly higher. On Wednesday, however, stocks moved in the opposite direction as multiple Fed officials struck a hawkish tone in their public comments.

The U.S. 10-year Treasury yield marched higher throughout the week to end at 3.74%. Two-year U.S. Treasury yields moved as well, causing the 2/10s spread inversion to reach a four-decade high of 77 basis points as recession fears reached a feverish pitch. WTI oil moved significantly higher for the week and ended at just under $80/bbl.

European stocks weakened on concerns that the European Central Bank’s continued hawkish stance would tip the bloc into recession. Japanese equities bucked the global trend of weakness and put up a positive week while investors awaited the approach of the next central bank Governor (due to be appointed by April). Lastly, Chinese stocks retreated as U.S./China tensions simmered in the face of the spy balloon controversy (potentially leading to further restrictions on the semiconductor space).

In the Economy

As previously mentioned, the economic calendar was incredibly light last week, as jobless claims came in slightly higher than expected at 196,000 but remained near recent nine-month lows. Additionally, the University of Michigan’s preliminary gauge of February consumer sentiment, released on Friday, marginally exceeded expectations and reached its highest level since January 2022. On Tuesday of this week, the all-important Consumer Price Index reading for January will be released, putting Powell’s disinflation theory to the test.