Weekly Macro Minute

GuideStone Reflections

Do not love the world or the things in the world. If anyone loves the world, the love of the Father is not in him. For everything in the world – the lust of the flesh, the lust of the eyes, and the pride in one’s possessions – is not from the Father, but is from the world. And the world with its lust is passing away, but the one who does the will of God remains forever.

1 John 2:15-17, CSB

In verse 15, John tells us not to love “the world.” Some of us who grew up in church may even have heard warnings against “being worldly” and received a list of behaviors to avoid. But what does John mean by “world”? Are we not to love other people? God's creation? The simple pleasures of life?

According to John, worldliness is a state of mind characterized by three things. The lusts of the flesh are natural desires like hunger and thirst or the need for love, companionship and pleasure. These wants are not necessarily bad, but living a life devoted to them is. Left unchecked, the desires of the flesh lead to gross excess. The lust of the eyes is a focus on superficiality and not on lasting, spiritual things that matter to God. The pride in one’s possessions is also called the pride of life – such a strong confidence in what we have accumulated or accomplished that we overlook the need for God. Put these three things together, and you have the oil that runs the world engine.

Here's the catch: You don’t have to be an atheist or agnostic to fall into this belief system. Christians can fall in love with the world as well. That’s why John gave us this warning.

Interestingly, John doesn’t warn us against worldliness with images of hellfire and brimstone. Instead, he reminds us that the world and these desires are fading away. If you live according to these things, in the end, you will die with nothing. In other words, loving the world is a bad investment.

Love is a choice, and there is always a cost to love. What are you investing your love in? Make your love count. Love the Father and the things that He loves.

Across the Markets

Global stocks ended the week marginally in the red, with the S&P 500® logging a flat result. Most bond sectors experienced a drawdown as there was no safe place to hide in yet another week of handwringing over the direction of inflation, global growth, earnings announcements and handicapping central bank action. Earnings season has seen quite a few upside surprises as the market digested better-than-expected bank results. Despite this, the first quarter’s earnings are on track for their worst decline since the second quarter of 2020. Inflation’s bite continues to wreak havoc on companies as the aggregate net profit margin for the first quarter is on track to log an increasingly lower metric for the seventh straight quarter. Elsewhere in markets, the U.S. 10-year Treasury yield ticked up for the week to end at 3.57% (roughly the average level it has been at year-to-date) and the 2s/10s inversion remains intact at 60 basis points. WTI crude oil trended down for the week, closing at just under $80/bbl (also roughly the year-to-date average) as investors contemplated the likelihood of reduced demand in an expected recessionary environment.

European shares bucked the U.S. trend and slightly rose on the week, with sentiment buoyed by an uptick in business activity as measured by the Purchasing Managers’ Index (PMI). Nonetheless, inflation remains much too high on the continent, and the recently released minutes from the March European Central Bank meeting showed a majority voted in favor of the 50-basis point hike. In Asia, Japanese stocks rose for the week, but markets are bracing for what could be tightening monetary policy under the new central bank Governor’s leadership. China saw its markets drop materially due to the news that the U.S. may introduce new investment curbs.

In the Economy

Thursday’s weekly jobless claims number shed light on a weakening labor market developing in the U.S. The weekly metric rose slightly more than expected (1.87 million), but continuing claims marked the highest level since November 2021. As has been the case for some time now, investors appeared divided on how to treat this release. Some saw it as good news as it might make the Fed more hesitant to hike rates further. On net, though, it appeared to be interpreted as bad news, given that a weakening labor market portends recession. Housing data also came in softer, with starts and permits coming down from February’s levels. Existing home sales fell, and year-over-year home prices dropped 0.9%, the largest decrease in 11 years. The week also saw the release of the Fed Beige Book, which showed that the economy has stalled in no small part to reduced access to credit, while the Philadelphia Fed Business Outlook fell more than expected and to its lowest level since May 2020.

In contrast to these weaker reports, however, the S&P Global PMI released Friday showed both services and manufacturing rose to their highest level in almost a year. The manufacturing metric moved back into expansionary territory (at 50.4) for the first time since October. According to S&P data, private employers recently hired at the fastest clip in nine months. Taken together, the calculus of how the all-important Fed will react to this continuing onslaught of economic data remains front and center with investors. We are entering the blackout period in which Fed officials are barred from making public comments as the rate decision is a mere ten days from now. Futures are currently pricing in a 90% chance of a 25-basis point hike at the May meeting.