Weekly Macro Minute

GuideStone Reflections

Children, it is the last hour. And as you have heard that antichrist is coming, even now many antichrists have come. By this we know that it is the last hour.

1 John 2:18, CSB

When many people hear the word “antichrist,” they frequently think of the character portrayed in books and movies: a future, larger-than-life, demonically-influenced person that comes to wreak havoc on Earth. But John warned his original readers that many antichrists have already come. Those antichrists were not larger-than-life figures that strode across the world stage. They were neighbors and friends who had once worshipped alongside them yet turned away from the faith to follow one of the many Christological heresies that plagued the early church (v. 19).

In English, when we see the prefix “anti,” we immediately think “against” or “opposite.” But in Greek, this prefix has an additional nuance: “replacement.” Those that had left the fellowship had replaced Jesus with a Christ different than the one handed down to them by the testimony of the Apostles – which meant, of course, that he was no Christ at all. These antichrists tried to enlighten John’s congregation to the “true” Christ. But because they claimed a Christ different from the Gospels, they were liars and deniers of God (v. 22).

Many antichrists have come and gone in the two thousand years since John’s letter, and plenty are alive today. Some even call themselves Christians, but they’ve replaced the real Christ with one of their own making – usually, one that furthers their agenda to “save” Christianity, keep it “relevant,” or find the “real Jesus.” According to John, the only defense against the spirit of the antichrist is to remain in the Son and the Father by letting what we heard from the beginning remain in us (v. 24). In other words, we need to live and breathe the Gospel. Unfortunately, many Christians base their faith on what they think they know about Jesus instead of what the scriptures actually teach about Jesus.

To remain in Christ, we begin by knowing His word. Without it, we are easy targets of the antichrist – all of them.

Across the Markets

Globally stocks were mixed on the week, while the S&P 500^® Index gained nearly 0.9%. For the full month of April, the index was up roughly 1.5% and now boasts a near 9% gain on the year thanks to the strength of mega-cap stocks in particular. Gains in stocks came despite economic reports showing a troubling mix of sticky inflation and below-consensus growth. Are these continued stock gains misplaced optimism, or are stocks rightly climbing the infamous wall of worry? One commentator aptly stated that markets seem to be pricing in “immaculate disinflation.”

This week, Microsoft, Alphabet, Meta and Amazon reported earnings and surprised the markets by beating expectations handily on both the top and bottom lines. Earnings season has seen quite a few upside surprises, but nonetheless, first-quarter earnings are on track for their worst decline since the second quarter of 2020, with margins beginning to feel the squeeze. U.S. Treasury yields generally decreased, and the U.S. 10-year Treasury fell 15 basis points on the week to end at 3.42% while the 2s/10s inversion remained roughly the same at 58 basis points. WTI prices edged lower to close below $77/bbl.

Markets largely ignored First Republic Bank’s renewed plunge in its share price (the stock is now down 97% on the year) on news of massive deposit flight and clearly didn’t foresee further contagion in the banking system. The FDIC is accepting bids for the purchase of the beleaguered bank due Sunday as a seizure of the bank is looking increasingly likely.

European shares fell as markets grappled with the European Central Bank tightening into a weakening economy as inflation continued to run much too hot. The eurozone economy expanded 0.1% quarter-over-quarter, with Germany stagnated and headline inflation still at 7.6% year-over-year. Japanese stocks rose, supported by a dovish Bank of Japan, where the new Governor, Kazuo Uedo, signaled at his first meeting a continued commitment (for now) to its yield curve control framework and ultra-loose monetary policy. China’s stock markets were mixed before a five-day holiday (markets will be closed Monday through Wednesday).

In the Economy

Real first-quarter GDP grew at a 1.1% annualized rate, the Bureau of Economic Analysis reported on Thursday, weaker than market expectations of a 1.9% gain. Weakness in the first quarter was primarily due to inventories which dragged the headline number down by 2.3%. Conversely, consumer spending came in at a solid 3.7% annualized rate (which is clearly not sustainable). While real GDP was weak, nominal GDP is still strong at a 5.1% annualized pace (near pre-COVID levels), given price inflation at 4.0%.

Meanwhile, the U.S. Employment Cost Index (ECI) should be a cause for worry for corporate profitability and a key reason the Fed is likely to be tighter for longer as inflation remains sticky. The ECI accelerated to 1.2% quarter-over-quarter and remains at 4.9% year-over-year. In addition, the all-important U.S. core Personal Consumption Expenditures rose 0.3% month-over-month in March (4.6% year-over-year), which, while clearly off the peak, remains too high for Fed comfort. Given recent Fed speeches arguing for another rate hike in May, these reports likely confirm the Fed is poised to hike at next week’s meeting and signal a tighter stance for longer. Fed futures are pricing in a greater than 80% chance of a 25-basis point rate hike at this week's upcoming meeting, with some uncertainty introduced into the market this week given both the weaker economic picture unfolding and the further unraveling of First Republic Bank and knock-on effects to bank lending.