General Market Commentary as of June 30, 2022
After a less than stellar first quarter to start 2022, US stocks had a rough second quarter. The S&P 500 ended the quarter down -16.45%, the Dow Jones Industrial Average was off -11.25%, and the Nasdaq Composite lost -22.44%. A major driver to this year’s equity market downturn continues to center around whether the Federal Reserve’s interest rate tightening cycle will modestly cool the US economy or lead to a recession as it attempts to suppress inflation. They admitted the inflationary pressures have proven more steady than transitory and after a rate hike in March, the Fed raised short-term interest rates twice in the past quarter. The 50 basis-point increase in May was followed by another 75 basis-point increase in June, the largest hike since 1994.
Rising prices are not unique to the United States and are prevalent worldwide. European energy and commodity prices are hampering other countries and could push many of the continent’s economies into recession and add pressure to a global slowdown. While the Fed has been ratcheting up their efforts to curtail inflation here at home, they don’t have the same ability to influence inflation internationally. Both emerging markets and non-US developed markets posted negative returns for the quarter with emerging markets outperforming the US and non-US developed markets.
While the Bureau of Labor Statistic’s unemployment rate remains near record lows, the CPI, following a decades high increase record reported on last quarter, is expected to continue to rise. Supply chain disruptions, pent-up consumer demand, and the hefty stimulus have all contributed to inflation. The current restrictive monetary conditions and the hampering of US equities year-to-date have raised uncertainty for consumers leaving them more constrained and the consumption binge has stalled as a result. Whether accompanied by recessions or not, market downturns can be unsettling. But over the past century, US stocks have averaged positive returns over one-year, three-year, and five-year periods following a steep decline.
Market Recap
| Tot Return | 3-MO* | 12-MO* | 3-Year* | 5-Year* | Closing Value |
|---|---|---|---|---|---|
| S&P 500 | -16.75% | -11.92% | 8.77% | 9.33% | 3,785.38 |
| Dow Jones Industrial Average | -11.25% | -10.80% | 4.98% | 7.59% | 30,775.43 |
| NASDAQ Composite | -22.44% | -23.96% | 11.27% | 12.43% | 11,028.74 |
Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.
All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.
