Market Highlights

Economic

• June consumer confidence fell to 98.7, as inflation hit a 40-year high of 9.1%
• Retail sales rose 1.0% in June, with auto sales down to 13 million units, below estimates
• Non-farm payrolls in June increased to 372,000, above estimates of 265,000
• Unemployment held at 3.6%, with underemployment falling to 6.7%
• U.S. industrial production fell -0.2%, following a rise of 0.2% in May
• Housing prices fell -14% on a year-over-year basis, with an increase in supply
• New home construction numbers were 1.54 million in May, below estimates
• Existing home sales were down at 5.4 million in , as mortgage rate rose over 6%
• U.S. manufacturing expansion is slowing, with June ISM at 53, below estimates
• Personal income was up 0.5% and consumer spending was down 0.2% in May
• GDP was down -1.6% in the first quarter, and second quarter estimates are -2.1%

Inflation

• June core inflation was 9.1% for CPI and 11.3% for PPI on a year-over-year basis
• Crude oil rose to $123 and has settled back to $95 as the war in Ukraine enters its third month
• Inflation is moving higher with increases in wages, rents, foods, and goods

Monetary Policy

• The Fed increased the Fed Funds rate to 1.58% and the Discount rate to 1.75%
• The Fed may raise rates by 75 basis points at the July meeting and 25 basis points in September
• The Fed will continue to raise rates and reduce its balance sheet to tame inflation

International

• The war in Ukraine continues as Congress sends more weapons
• Finland and Sweden are ready to join NATO after Russia's invasion
• China has more lock-downs as COVID variant spreads
• The global recession has begun as copper and other commodities roll over

Interest Rates

• Ten-year Treasury yields rose from 2.35% to 3.47% and now stand at 2.99%
• Libor, the inter-bank lending standard, is 2.73%, and is set to be phased out later this year
• Mortgage rates rose, as the 30-year fixed rate increased to 6.03%
• Yields on international debt have turned positive as rates and inflation rise

Earnings

• Corporate earnings still beating estimates 68% of the time and revenues beating 65%
• 2022 earnings are projected to grow 4%, down from 9%, as earnings have been revised
• Earnings have decelerated as Foreign exchange rates and higher interest rates take hold

Market Outlook

• S&P 500 was down -20% for the 2022 as tech-heavy Nasdaq market was down -29%
• Market volatility increased as the Fed tries to regain credibility
• Consumer Staples, Utilities, and Energy were the best performing groups
• The S&P 500 is trading at 15.9 times forward earnings, above its 25-year average

top of page