Quarterly Market Update 6.30.2022

Scott Campbell |

The U.S. stock market was down -16.85% in the first quarter and down -21.28% year to date. The U.S. bond market was down -3.78% in June and down -9.14% year to date.

The U.S. stock and bond markets have both been down for five consecutive months only three other times in history. There has been no safe haven from the carnage.

All downturns are different, caused by different circumstances or at least different doses of the same circumstances, so there are no other comparable times to look to for guidance.

Most experts agree that if the market has not bottomed it is near. But no one knows for sure!

One important note - 70% of economic growth in the U.S. is driven by consumer spending. Making employment a very important factor. Inflation hurts employment as consumers must spend more on fewer items. However, current inflation readings show that commodity prices have dropped and things like grocery prices are leveling. Evidence inflation is leveling will be good news for markets. Gas and energy prices, however, require a political solution.

The talk now is about a recession. Is one coming? Are we in one? And of the Federal Reserve and whether they can control inflation and not cause a "hard landing" or recession. The Federal Reserve makes all their decisions based on historical data. It's rather difficult to control the future when looking in the rear view mirror. The U.S. has experienced many recessions. Most recently the "Great Recession" and the markets fared well.

Now for the good news! If you are contributing to your 401(k) you have been buying terrific companies at super low prices. For example, on Friday Amazon stock was trading at the same price (split adjusted) as four years ago! If that is not on sale, I don't know what is. Anyone worried about Amazon going out of business?? The way to make money is to buy something at a low price and sell it for a higher price. Especially something of value. You have been buying valuable stocks at super low prices.

Interest rates are finally rising. Retirees and conservative investors over the past 15 years have been forced to invest in stocks because all time low interest rates mean no return from bonds.​​ As interest rates rise to more long term normal levels bonds will once again earn a return. It was normal for a conservative bond portfolio to earn 5% - 6% annually 15 years ago.
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