Despite reaching new highs in early January, the first half of the year ended up being the worst in 50 years for the stock market, with the S&P 500 down -21%*, and the Nasdaq index off nearly -30%*. Bonds were also down, recording their worst performance ever, with US treasuries down -11%* and top-rated US corporate bonds down-14%*.

Worries about the economic impact of an aggressive Fed raising interest rates to slow inflation, which clocked in at 9.1% (CPI) in June for a forty-year high, sent stocks and bonds tumbling. Not knowing when inflation might peak, how long it will stay high, and if the Fed might tighten too much, has led to
fears over a possible recession.

The invasion of Ukraine, with its ongoing impact on oil and food prices and uncertainty of duration, has likewise affected investor sentiment negatively.

The best performing sectors, primarily in the broad-based tech area and consumer discretionary, were hit hard, with many good healthy companies down 30-50% as investors dove for the bunkers.

But with clear signs of economic growth slowing – housing demand softening, commodity prices rolling over, wage growth moderating — inflation is likely at or close to peaking. With a low 3.5% unemployment rate **, job openings still plentiful and consumer and corporate balance sheets in good shape, the stock market seems to have priced in a lot of bad news.

All eyes have been on second-quarter earnings, with companies like JP Morgan, American Express and major airlines reporting robust consumer spending, e.g., American Express had record consumer card usage, up 30%. With more than 90% of S&P 500 companies reporting as of this writing, nearly three
quarters have beat estimates** and forward guidance has been promising.

Better than feared earnings and forward guidance, in combo with recent comments from Fed Chair Powell that he saw no recession currently, was enough to ignite the recent rally.

Not infrequently, such dismal stock market performance is followed by a strong rebound, and indeed, the start of the second half has been markedly different, with July the best month since November 2020: the S&P 500 was up +9.11%* and Nasdaq up +12.4%*.

In mid-June, nearly three-quarters of S&P 500 stocks were off more than 20% from their highs**** and historically, when more than half the S&P stocks were in a bear market, the stock market made returns of 7.6%, 11.3% and 20% over a 3, 6 and 12-month period.****

Our view is that the lows have been seen for the year, and a new higher trading range has been established. We have been buying into weakness and positioning portfolios for future recovery.

We continue to focus on your financial planning and investment needs and have an audited track record to back up our unwavering commitment to your financial health and well-being.

Please don’t hesitate to contact us with any questions and/or concerns.

With warmest regards,
Barbara Doran
BD8 Capital Partners LLC
Cell: 917-733-7644
Fax: 917-580-6882

*Dow Jones Market Data
**US Bureau of Labor Statistics
**** Fundstrat

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