My late summer, quarterly post covering market commentary, personal updates, and some links.
Market Commentary
I sent the below summary (tweaked slightly for this post) to several clients over the past few weeks. I believe it’s a relevant, quick summary of what we’ve seen in the markets so far this year:
As we highlighted in the first quarter review, the ever-changing economic and market conditions had a significant impact on the equity and fixed income markets again this past quarter. The slowing economic growth (recession fears), highly elevated global inflation, continued labor shortages, geopolitical conflicts, and interest rates have dominated the headlines and continued to unnerve many investors in both the equity and fixed income markets throughout the quarter and year-to-date.
On the equity side of the portfolio, the increased volatility in both the US and International equity markets this year has largely been driven by higher interest rates and slowing economic growth of both developed and emerging economies. As we highlighted last quarter, this has created a lot of uncertainty for the prospects of company earnings as well as the future of global growth. As of June 30th, the S&P 500 index was down 20.6% year-to-date while the MSCI EAFE (International) index was down 19.6% for the year. Since June 30th, we’ve seen a rebound in virtually every asset class which leads us to believe that a lot of the “bad news” has been priced into the markets. We often like to remind clients that the markets are always forward-looking and largely react to future prospects as opposed to today’s news and economic numbers. We would expect to see continued equity market volatility until we can get some greater clarity into inflation, economic numbers, and corporate earnings in the coming months and quarters.
The spotlight remains on the US Federal Reserve as they continue to raise interest rates at an accelerated pace. The Federal Funds rate was increased by 0.75% in both June and July with more hikes likely to come through the remainder of the year. The 0.75% hike in June was the largest rate increase since the mid-1990s. The Fed is predominantly trying to fight inflation, which remains highly elevated. The year-over-year Consumer Price Index (CPI) reading has been above 7.0% over the last 6 months although it has shown signs of starting to decrease over the last few weeks. We remain hopeful that the Fed will be able to bring this inflation down to a lower level without pushing the economy into a major recession. On the fixed income side, the rising rates have pressured bond prices severely this past quarter, and all year. Since bond prices and yields move in opposite directions, the increase in yields has hurt the value of our existing holdings. From an investment perspective, we expect yields to continue to rise but are starting to see opportunities in the bond markets that we haven’t seen in over 3 years. We are keeping an eye on the interest rates and yields and will be looking to improve our fixed income holdings over the next several quarters.
As always, we’ll continue to follow these economic issues/market data, both here in the US and globally, and advise you if any additional investment changes are needed. We remain optimistic during these temporary market selloffs and remain confident in our long-term strategy of having a globally diversified portfolio that is designed to weather the ups and downs through the various market cycles.*
Personal Updates
It’s hard to believe the summer is slowly winding down. We’ve had some wonderful trips to the beach, and mountains, and catching up with friends and family throughout the summer. In more important news – we bought a new house (moving in late September) and are in the process of selling ours. While plenty to get into on the subjects of real estate and housing, I’ll save those for another post! We are really excited about this new chapter but sad to leave our current house, which was the first home we purchased. Also, Gaines will be a big brother later this year! We are expecting our second child, a girl, due in December. We are beyond excited and, as always, Cameron is a superwoman! I’ve included some pics below but somehow we never get many family pics.
Links, Articles, Miscellaneous
A few articles, podcasts, or interviews that I’ve enjoyed recently.
- The People Making Millions off Listerine Royalties (The Hustle)
- The Lonely Office Is Bad for Ameria (WSJ)
- The Haves and Have-Yachts (The New Yorker)
- Parents Pile into Work Conferences to Escape Their Families (WSJ)
- Incognito Mode isn’t Incognito (The Wirecutter)
All for now, and please reach out anytime.
Tom
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* This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the readers as research or investment advice nor should it be construed as a recommendation to hold, purchase or sell a security. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. The S&P 500 Index is an unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market. Performance of an index is not illustrative of any particular investment and performance figures quoted are historical. It is not possible to invest directly in an index.