Monthly Market Recap: July 1, 2022

June Market Recap

July 1, 2022 

Every successful investor knows the value of practicing patience, but the waiting game is becoming admittedly more difficult to play.

The stock market concluded the first half of 2022 with an appropriately teeth-gritting month. The S&P 500 fell 8.4% in June. The benchmark index’s 20.6% loss year-to-date is the worst 6-month start to a calendar year since 1970. Despite heavy downward pressures in the first two weeks, however, equities did climb higher in the second half of June.

All 11 sectors in the S&P 500 declined compared to a month earlier. In a notable change from recent trends, Energy (-17%) performed worse than any other sector. Materials (-14.1%) were also especially weak. Health Care (-2.8%) and Consumer Staples (-2.9%) proved most resilient.

Index May 2022 YTD 2022
Dow -6.71% -15.31%
S&P 500+ -8.39% -20.58%
NASDAQ -8.71% -29.51%

The first week of June was relatively uneventful as investors waited for the latest inflation data. There was a building sense of hope that inflation may have peaked in previous months and the Consumer Price Index report on June 10 would confirm as much. Instead, the latest CPI number announced on June 10 caught markets completely off guard, revealing 8.5% annual inflation (compared to 8.3% a month earlier).

Stock prices sold off aggressively. The S&P 500 fell 2.9% on June 10 and 5% total from the previous day’s peak. The Dow Jones Industrial Average lost 880 points on June 10 and more than 1,500 points total from the previous day’s high. When markets closed on June 10, it ended the most negative week for stocks since January.

Five days later on June 15, the Federal Reserve raised its benchmark interest rate by 0.75%, despite Fed Chair Jerome Powell saying a month earlier that “0.75% rate hikes were not being actively considered.” It was the first time since 1994 the Fed raised rates so significantly in a single hike.

On June 16, the average price for gasoline (nationally) hit $5.11 per gallon, another 10% higher than the price as of May 31. 30-year fixed mortgage rates hit 5.8% that day, their highest level since 2008. As of its intraday low on June 17, the S&P had fallen nearly 25% from its early January peak

Enough with the bad news. The last three times the S&P 500 fell 12% or more in 10 trading days (as it did in June) occurred in March 2020, August 2011, and March 2009. All of those represented significant “bottoms” for US stock prices.

From its June 17 low, the S&P 500 gained 4.1% through June 30. As for the worse-than-expected inflation report, if we strip out the items linked to energy (airfares, moving/freight, rental cars, delivery services, new & used vehicles) Core CPI was +0.36% from a month earlier and only 4% higher year-over-year. If oil prices retreat from their sky-high levels, inflation could slow more quickly than many expect.

It was an interesting month in the bond market. 10-year US Treasury yields climbed as high as 3.48% on June 14, the highest in 11 years. Since then, however, bond prices rallied and yields decreased. By month’s end, 10-year yields had fallen all the way to 2.97%, suggesting a lack of faith in the Fed’s commitment to raising interest rates as the economy inevitably weakens.

International equities performed marginally better than US stocks last month. Non-US Developed Markets lost 6.6% in June. Emerging Market equities held up a bit better, declining 4.3%.

Although crude oil prices remain elevated, they did pull back roughly 13% in the final three weeks of June. Other commodity prices have also weakened considerably. Copper fell almost 20% in the second quarter (April through June). Lumber prices are down more than 30% over the same period.

On one hand, lower commodity prices reflect some economic weakness. On the other, less expensive material costs are a benefit in the fight against inflation.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.