June Market Outlook

Where We Were

May 2022 has proven to be nothing short of a roller coaster ride for the markets, as ongoing volatility and worries about monetary tightening to combat inflation sparked fears of a recession on the horizon. The year-to-date sell-off of stocks accelerated this month, while the S&P 500 had its worst month since the onset of the pandemic.^[1]

The Fed’s recent rate hikes should come as no surprise, as it tries to combat the highest inflation rate in 40 years,^[2] even as some economic data showed some easing of price pressures last month. Investor confidence rose after meeting minutes from the Federal Reserve reduced some concerns about aggressive measures to tame inflation.^[3]

Investors and analysts have pointed out that what has so far been a downward retail spiral reflects a shift in consumers’ demand for services rather than goods, and some have suggested stocks may be getting overly punished for their results.

In the housing market, the US government released data showing sales of new, single-family homes fell by nearly 17% month-on-month to 591,000 units in April—well below the consensus forecast of 750,000 units.^[4]

As we look abroad, there appears to be no end in sight for the geopolitical instability that has characterized 2022. Namely, it appears that the war in Ukraine may turn into an extended conflict that could yield an international food crisis, as commodity exports from this region continue to dwindle.

Where We Are Going

So where does this leave us? In many ways, with a similar outlook to how we began Q2, as volatility and inflation will likely not abate any time soon. Indeed, these factors remain present today and are taken into consideration as we position your portfolio for the current bear market (and the eventual bull market that will follow).

We further remain focused on reviewing the effects of ongoing geopolitical instability, the Fed’s next move, and market shifts as part of our regular process for evaluating risk and opportunities. We remind clients that overly emotional reactions to a down market are a good way to derail progress made toward reaching your financial goals. So, as a central tenet of our practice, we continue to emphasize staying the course, thoughtful diversification, and opportunities to take advantage of low-cost buys in this bear market. Collectively, these endeavors will help maintain a resilient portfolio for what appears to be choppy markets with high volatility in the near-term.

Additional Thoughts

Perhaps, the most important thing to remember is that bear markets always happen and, statistically, they come around about once every four years.^[5] Typically, they tend to be rather short, and these are periods when you see a lot of attractive bargains that you can take advantage of.

[1] Google Finance: https://www.google.com/finance/quote/.INX:INDEXSP?sa=X&ved=2ahUKEwjakoOxg_v3AhUtn44IHf-QAOAQ3ecFegQIHBAY

[2] CNBC:  https://www.cnbc.com/2022/05/11/cpi-april-2022.html

[3] Wall Street Journal: https://www.wsj.com/articles/global-stocks-markets-dow-update-05-26-2022-11653550227

[4] Business Insider:  https://www.businessinsider.com/housing-bubble-2022-new-home-sales-april-plunge-cooldown-2022-5?r=US&IR=T&utm_medium=ingest&utm_source=markets

[5] Kiplinger:  https://www.kiplinger.com/slideshow/investing/t052-s001-8-facts-you-need-to-know-about-bear-markets/index.html