The Independent Market Observer

2022 Midyear Outlook: Energy Supply Vs. Demand Dynamics

July 29, 2022

Energy was the top-performing equity sector in the S&P 500 during the first half of 2022, with a total return of 31.8 percent. Crude oil and natural gas fundamentals were favorable heading into 2022 amid strong demand, low inventories, and limited spare capacity globally. Since the pandemic recovery, demand has exceeded supply for both commodities. Furthermore, Russia’s invasion of Ukraine accelerated the supply constraints resulting in spiking energy prices.

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Are We in a Recession or Not?

July 28, 2022

The first estimate of national economic growth, the gross domestic product (GDP), came in this morning at an annualized, quarter-on-quarter growth rate of –0.9 percent. This is better than last quarter’s number of –1.6 percent, but it is still the second quarter in a row of decline. By some definitions, this means we are now in a recession, and you can expect to see that all over the headlines in the next several days.

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The Earnings Season: Better Than It Looks?

July 27, 2022

According to FactSet’s data, the earnings data so far is somewhat disappointing. As of the end of last week, with 21 percent of S&P 500 companies reporting, fewer companies were beating expectations for both revenues and earnings than has been normal. Earnings growth for the quarter is expected to be the lowest since the end of 2020, when the pandemic was really getting going and before the federal stimulus programs hit. Taking those headlines, things look pretty bad.

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Fed Preview: How High Will Rates Go?

July 26, 2022

So, what will the Fed do at today's meeting? Almost everyone thinks it will raise rates by 75 bps, or three-quarters of a percent. Almost, in this case, means that a minority of people think the Fed will raise rates by more, like a full percentage point. But the takeaway is that everyone does expect rates to go up—and by an amount that, prior to the past couple of months, would have been shockingly large.

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Economic Release Snapshot: Housing Sector Slows in July

July 25, 2022

Each week, we break down the latest U.S. economic reports, including what the results mean for the overall health of the economy. Here, you will find how economists’ forecasts compare with actual results, key takeaways to consider, as well as a list of what’s on tap for the week ahead.

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Time to Panic About the Strong Dollar?

July 21, 2022

One of the headlines I have been asked about recently is the strong dollar. People are concerned about what it means, how it could hurt the U.S. economy, and, of course, how it will affect their investments. Good questions all.

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2022 Midyear Outlook: The Road Ahead for Fixed Income

July 19, 2022

One of the most surprising things to come out of the first half of 2022 was the walloping fixed income investors received from bonds. The Bloomberg U.S. Aggregate Bond Index posted its worst 12-month return in its entire history, which caused many investors to shed exposures, particularly longer-term sectors.

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Economic Release Snapshot: Inflation Accelerated in June

July 18, 2022

Each week, we break down the latest U.S. economic reports, including what the results mean for the overall health of the economy. Here, you will find how economists’ forecasts compare with actual results, key takeaways to consider, as well as a list of what’s on tap for the week ahead.

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Consumer Confidence Vs. Consumer Sentiment

July 15, 2022

One of the questions I have been getting recently is about consumer confidence. Some headlines are saying it is at all-time lows, while others (including me) are saying it isn’t bad at all. Since how people feel obviously affects how much they spend and, therefore, the economy, this is a big and meaningful difference. So, what is going on?

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Is the 60/40 Portfolio Dead?

July 14, 2022

One of the standard portfolios that investors use, with 60 percent stocks and 40 percent bonds, has had a really bad start to the year, with the largest declines in decades. These portfolios were supposed to balance growth and risk, with both allocations growing over time but with each offsetting the other. When stocks were up, bonds would be down, and vice versa. As such, this was the portfolio that would let investors participate in the market’s gains without too much of the downside.

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Monthly Market Risk Update: July 2022

July 13, 2022

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

Equity markets experienced widespread sell-offs in June due to rising investor concern about slowing economic growth and persistently high levels of inflation. The S&P 500 lost 8.25 percent during the month, while the Dow Jones Industrial Average lost 6.56 percent. The Nasdaq Composite saw the largest decline, as the technology-heavy index was down 8.65 percent in June. The market turbulence capped off a challenging quarter for equities and served as a reminder that real risks remain for markets that should be acknowledged and monitored.

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2022 Midyear Outlook: A New Paradigm for Equity Investors?

July 12, 2022

After nearly two years of a stock market that seemed to move higher each day, investors are now experiencing a bout of volatility that has not been seen in quite some time. So, will the second half of 2022 bring a return to the lackluster market environment that investors grew accustomed to in 2020–2021 (with the exception of the novel coronavirus sell-off)? Or should we expect elevated volatility to become the norm moving forward?

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Monday Update: Hiring Remains Strong in June

July 11, 2022

There were several important economic data releases last week, with a focus on the minutes from the Fed’s June meeting and the June employment report. The jobs report showed that hiring remained strong in June, which was an encouraging sign for the overall economy and a reminder that the labor market remains healthy. This will be another busy week of updates, with a focus on the June inflation and retail sales reports as well as a look into industrial production and consumer sentiment.

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Economic Risk Factor Update: July 2022

July 8, 2022

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam!

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Looking Back at the Markets in Q2 and Ahead to Q3 2022

July 7, 2022

June was a terrible month for the markets, capping off a disappointing second quarter. The S&P 500 lost 8.25 percent during the month and 16.1 percent for the quarter; the Dow Jones Industrial Average lost 6.56 percent during the month and ended the quarter down 10.78 percent; and the Nasdaq Composite lost 8.65 percent in June and 22.28 percent for the quarter. The Nasdaq Composite also saw the largest monthly and quarterly declines due to its heavier weighting on beaten-down technology stocks.

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2022 Midyear Outlook: Slow Growth Ahead?

July 6, 2022

As we move into the second half of 2022, there are lots of things to worry about. Covid-19 is still spreading, here in the U.S. and worldwide. Inflation is close to 40-year highs, with the Fed tightening monetary policy to fight it. The war in Ukraine continues, threatening to turn into a long-term frozen conflict. And here in the U.S., the midterm elections loom. Looking at the headlines, you might expect the economy to be in rough shape.

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Monday Update: Personal Spending Slows in May

July 5, 2022

There were several important economic data releases last week, with a focus on business spending, consumer and manufacturer confidence, and the May personal income and spending reports. Personal spending growth came in below expectations during the month, echoing a similar decline in retail sales growth in May. This will be another busy week of updates, with a focus on service sector confidence, the minutes from the Fed’s June meeting, and the June employment report.

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Market Thoughts for July 2022 [Video]

July 1, 2022

June was a terrible month, with stock markets in the U.S. and abroad down substantially and developed international markets hit the hardest. The underlying reason? The Fed. With inflation high, the Fed has raised interest rates over the past six months, which has driven the risks of a recession. Still, the economic news is healthy. Companies are hiring, supporting spending growth, and business investment is sound.

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Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

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