Weekly Macro Minute

GuideStone Reflections

“Be strong, all you people of the land—this is the Lord’s declaration. Work! For I am with you—the declaration of the Lord of Armies.”

Haggai 2:4, CSB

When the prophet Haggai delivered this message to the Judeans, they were right in the middle of rebuilding the Temple, and it had not been going well. For one thing, they were competing against the memory of Solomon’s magnificent Temple, which had been destroyed by the Babylonians many years earlier. They were discouraged because their efforts didn’t seem to be amounting to much, and it was clear that once they finished, all they would have would be a plain wooden box of a Temple. The whole project felt like a failure. Solomon’s Temple had been a testament to a great God. Theirs would be just a reminder of their mediocrity – at least in their minds.

But God promised them that the “final glory of this house will be greater than the first” (Haggai 2:9, CSB). They didn’t know that centuries from their time, that plain wooden box would expand into a beautiful house of worship, a suitable place for the Son of God to teach, worship and minister – a greater glory than anything the Judeans or Solomon himself could imagine.

Haggai was preaching to people in “the middle” – and the middle frequently feels like failure. When you are in the middle of doing the things in life that matter, at some point, you will feel like you’ve hit a wall or, even worse, that all you’ve done so far has been worthless. But in God’s hands, you, your life and your work are so much more than just the sum of the parts. We won’t always know what God is building through us, especially at that moment in the middle. But God is responsible for the end product of the work of our lives. We are responsible for the process of living and working faithfully.

God is never disappointed with faithfulness. He told the Judeans to be strong. When God says that, He means, “You’re doing okay. Just keep at it because that’s enough for me." For those times when you’re living in the middle, focus on being faithful and know you’re building more than you can see.

Across the Markets

Global stocks had robust gains last week as optimism reigned once again, with investors grabbing on to any positive message they could and looking past the current resurgence in rates and inflation. The S&P 500^® Index snapped three weeks of losses led by gains in energy, materials, and communication services. Some investors took solace in the Index bouncing off its 200-day moving average, and investor complacency can be seen in the lower market volatility displayed last week.

A chorus of Federal Reserve officials spoke strongly on further rate hikes needed and fed funds futures responded with priced in peak rates now near 5.5%. However, risk assets took note of Atlanta Fed President Bostic’s supporting of only a 25-basis point hike in March and his comments that the “Fed could be in a position to pause by mid to late summer.” No matter how many times peak rates get pushed back or move up higher, risk assets seemingly get excited at the prospect of reaching it and stage a rally. Bonds moved meaningfully to price in what they were hearing from Fed officials, with the 2-Year Treasury hitting a 15-year high of 4.94% during the week (4.86% at week’s end) and the 10-Year Treasury rising to a three-month peak of 4.09% before settling back to 3.95%. Credit spreads also continued to compress despite the higher yields.

The dollar weakened notably, and commodity prices jumped last week. WTI rose 4.4% to $79.86/bbl, and natural gas prices jumped back over $3 after briefly dipping below $2 just a week and a half earlier.

European stock markets were up 1% to 3%, taking cues from stronger economic data despite Eurozone core inflation unexpectedly moving up to 5.6% from 5.3% year-over-year for February. Asian markets benefited from stronger-than-expected data from China as Purchasing Manager Indexes (PMI) from China were materially above expectations. In particular, manufacturing PMI data rose to 52.6 in February from 50.1 in January. Additionally, new home sales for China's top 100 developers rose 14.9% after slumping the prior 19 months in a row. A rebound in the real estate sector is very significant for China’s economy.

In the Economy

Economic data released this week suggest that the U.S. economy remains resilient thus far, with extremely tight labor markets. This resilience is keeping robust core inflation sticky and highlights speculation that the Fed has again fallen behind the curve. ISM manufacturing ticked up to 47.7 with a resurgence in prices paid back into expansion territory, while ISM services held nearly steady at 55.1. U.S. initial jobless claims ticked down to 190K, highlighting labor market tightness. The Conference Board Consumer Confidence measure unexpectedly declined to 102.9 due to a decline in expectations, foreshadowing a likely drop in demand ahead. On the flip side, fourth-quarter headline gains in productivity missed expectations with only a 1.8% gain, which leaves the year-over-year measure with a fourth consecutive negative reading – a first since at least the early 1970s.