Weekly Macro Minute

GuideStone Reflections

I have written these things to you who believe in the name of the Son of God so that you may know that you have eternal life.

1 John 5:13, CSB

John wrapped up his letter to his first readers by reminding them why he was writing: to assure them of their salvation. While former members of their congregation had embraced heresy and abandoned the apostolic teachings, some had remained faithful to the tradition they had received. But this was not simply his congratulations to them for sticking with it. He intended his people to use “these things” that he had written as a spiritual mirror. In other words, he drew a picture of the Christian life so that they could compare it with their own lives to see how they were doing.

This is John’s message to us as well. Go back and read this short letter. You’ll see that John wrote some hard truths, describing with stark clarity what the Christian life should be. He tells us things like whoever makes a practice of sinning is from the devil (3:8), everyone who hates his brother is a murderer (3:15), and to call ourselves “Christians,” we must be willing to lay down our lives for each other (3:16). Our assurance of salvation comes from comparing the words of Scripture with the picture of our lives. If they don’t align, there’s a problem that requires our repentance.

Now, understand that eternal security and assurance of salvation are different. The Christian is eternally secure thanks to Christ’s death and resurrection. Salvation, once received, is never lost. But our assurance of that salvation comes from comparing our life with the Word. If Scripture never drives us to repentance, then either we’re not reading it deeply enough – or we’re not reading it at all. The worst thing for us as Christians is to think that we are spiritually better off than we truly are. How’s your assurance?

Across the Markets

Globally, stocks generally ended lower for the week, with the S&P 500^® Index posting a modest 0.3% decline despite some positive earnings reports from a few tech stocks. Regional bank stocks continued to weigh on the market as a whole. On the bright side, there were no additional banking failures, and there are still few signs of systemic contagion from the fallout.

The biggest economic news of the week was consumer prices, and the headline Consumer Price Index (CPI) number slowed to 4.9%, which supports the notion of a Fed pause but NOT an easing. The debt ceiling standoff remained a key headline, with talks happening but a significant divide between the parties. The consensus view is a deal will get done (we agree). Still, risks remain that it occurs just before or after the "X" date set by Treasury Secretary Yellen for the U.S. government running out of money with the potential for some harmful volatility.

U.S. Treasury yields were broadly unchanged on the week, with the 10-year yield finishing up two basis points at 3.46%. WTI oil declined for a fourth week on persistent demand concerns to close at just over $70/bbl.

European shares were modestly lower in local currency terms, but the U.S. dollar strengthened about 1.5% against the euro, adding to losses for U.S. investors. Economies there remain on recession watch, and European Central Bank President Lagarde continues to make hawkish remarks concerning the ongoing inflation fight post last week’s 25-basis point hike. The UK economy grew just 0.1% in the first quarter, barely avoiding a forecasted recession. The Bank of England raised both its key interest rate (up a quarter point to 4.25%) and its inflation forecasts. Meanwhile, Germany is also in danger of recession, as manufacturing orders declined 10.7% in March, more than expected.

Japanese markets rose on positive earnings while investors looked for clues as to when Ueda might adjust the Bank of Japan’s stance on its ultra-accommodative monetary policy. Chinese stocks fell about 2%, and yields drifted lower on signs of economic weakness and expectations for further government stimulus.

In the Economy

The week’s biggest economic news was the April CPI numbers released on Wednesday. Both headline and core CPI (headline ex. food and energy) inflation rose 0.4% month-over-month, and the year-over-year headline figure fell for the tenth straight month to below 5% for the first time in two years. While peak inflation is long in the rear-view mirror, inflation remains a sticky problem. Core inflation rose 5.5% year-over-year, and even the three-month annualized rate was 5.1%, a far cry from the Fed’s 2% objective. Used-car prices bounced a massive 4.5% on the month, contributing to the strong inflationary reading after steadily declining the previous 14 months.

On the other hand, airfares and hotel bills declined after increases in prior months, illustrating that prices are likely to be volatile and not fall in a straight line. Inflation expectations released Friday moved opposite to what the Fed wants, as five-year inflation expectations by the University of Michigan Survey rose to 3.2%, the highest level since 2011. This report also showed consumer sentiment weakening to its lowest level in 2023.