Weekly Macro Minute

GuideStone Reflections

This is the judgment: The light has come into the world, and people loved darkness rather than the light because their deeds were evil.
John 3:19 (CSB)

Some would say that coffee is an acquired love. When they first tried it, they didn’t like it, but by forcing themselves to drink it repeatedly over time, they learned to love it. They might even contend that they can’t live without it now! They changed their heart’s affection by changing their behavior.

This is true in other areas of life. We learn to love some things by simply repeatedly trying or practicing them. If we just trained ourselves to love healthier and better things, we could solve many of our problems.

However, no amount of training will solve our most fundamental problem: we love darkness instead of light. Jesus tells us this is why people reject him. They love their sin too much to give it up for him.

No amount of behavior modification can make us love the light of Christ. No amount of behavior modification can help us escape our just condemnation. For that, we need a new heart.

Earlier in chapter 3, Jesus told Nicodemus that the only solution to this fundamental problem is to be “born again” (verse 3). Through the Spirit, we are reborn as new creations (2 Corinthians 5:17). Born of the Spirit now, we no longer love darkness; we love the light. We may still struggle with sin, but in the light of Christ, we finally see it for what it is: something hideous and destructive. As born-again people given a new heart, our affection for Christ now shapes our behavior. What we do reflects the One we love.

Across the Markets

Market volatility increased this week, driven by recent economic data releases and escalating geopolitical developments in the Middle East. Robust consumer spending, coupled with a supply-constrained housing market, has prompted investors to temper their expectations on the timing of potential interest rate cuts by the Federal Reserve. Fed Chair Jerome Powell reinforced this point by noting in a speech on Tuesday that it’s “likely to take longer than expected” to gain sufficient confidence that inflation is on a sustainable path towards the 2% objective.

The recent pullback of the S&P 500® Index from its record high at the end of March intensified, with a 3.1% decline over the week. This marks the Index’s third consecutive weekly decline, totaling a decrease of around 5.5% from its recent peak. Defensive sectors, particularly utilities and consumer staples, outperformed for the week, while sectors sensitive to higher interest rates, such as technology, consumer discretionary, and real estate, led the Index lower.

U.S. Treasury yields climbed for the third consecutive week as investors reduced their expectations for near-term interest-rate cuts. The yield of the 10-year U.S. Treasury bond briefly reached 4.69% on Tuesday, marking its highest level since last November, before moderating slightly to close at 4.61% on Friday, representing a nine-basis point increase on a week-over-week basis.

The U.K. March Consumer Price Index (CPI) report revealed a decline in headline inflation to 3.2%, with core CPI (headline CPI ex. food and energy) also easing to 4.2%. While March’s figures marked continued progress in disinflation, the improvement was less than expected. The slowdown in disinflation and higher energy prices have led investors to revise their expectations for the first cut in U.K. interest rates from June to sometime in the fall.

Japan’s stock market fell this week, impacted by the escalating tensions in the Middle East. The Bank of Japan continued its rhetoric, signaling a potential rate hike if the yen weakens further, increasing inflationary pressures.

China’s economy grew faster than expected, with GDP increasing by 5.3% annualized over the first quarter. Despite the healthy economic growth rate, home prices fell for the ninth consecutive month as the real estate sector remains a significant drag on its economy.

In the Economy

Retail sales outpaced expectations in March, with the Commerce Department reporting a 0.7% month-over-month increase, surpassing consensus estimates of approximately 0.4%. The strength in retail sales was widespread, including healthy gains in consumer discretionary categories. Moreover, February’s retail sales number was revised higher, further supporting the strength of the March report and highlighting resilient consumer demand and the economy's strength.

In March, housing starts saw a notable decline of 14.7%, partially attributed to adverse weather conditions in parts of the country and the early Easter holiday. Additionally, existing home sales fell by 4.3% during the same period, largely in line with consensus forecast. The subdued housing activity observed in March, compounded with the persistent shortage in housing supply, has heightened concerns regarding inflationary pressures.