The year so far has been tough (to say the least), and if you are like most investors, it feels like there is no end in sight to the negative headlines. With so many people around the world experiencing higher rates of inflation, tighter financial conditions, and the negative effects of the ongoing war in Ukraine, financial markets have been feeling the pressure. Uncertainty and market declines are certainly unsettling, but it’s important to stay level-headed and not focus too much on the things you can’t control. While there are still many unknowns, let’s take some time to reflect and review what’s happened so far this year and what might be next.
Stock Market Performance
It’s no secret that the broader stock market has shown losses through the first half of the year, likely the result of higher inflation (9.1% for the 12 months ended June 2022) and the Federal Reserve’s response by raising interest rates. The Federal Reserve has raised interest rates by 0.50% in May, 0.75% in June, and .75% in July. Furthermore, they have indicated that they will continue raising rates through the remainder of 2022.
This year has seen concerns regarding the global economy reach new highs as many countries struggle in different ways:
- The ongoing COVID-19 surge in China has prompted fresh rounds of lockdowns and stifled economic growth.
- The war in Ukraine has triggered a global food shortage, as Ukraine and Russia provide a combined 19.1% of the world’s grains.
- High inflation in the U.S. is reducing demand for everyday goods and could send the economy into a recession.
There’s no way to know exactly how all these events will unfold and how they will continue to affect the broader stock market, but our best advice is to keep calm throughout the storm. Stock market downturns and recessions are normal parts of the economic cycle, and sticking with a tried-and-true investment strategy is the best way to navigate uncertain times.
There is no shortage of commentary around recession talk these days. On any day you might read that we are in a recession, about to go into a recession, or that a recession is in the cards for 2023. The truth remains to be seen, but it’s important to remember that the NBER (National Bureau of Economic Research), the organization that is responsible for calling and dating recessions, base their decision on several factors including: incomes, employment, real consumer spending, industrial production, household employment, and retail sales. Currently, these indicators that are used to determine a recession are not showing a severe downturn like we would see in a typical recessionary period.
Some economists refer to a technical recession as two or more quarters of GDP contraction. During the first half of the year, we have seen just that with 1st quarter GDP contracting at 1.6% and 2nd quarter GDP contracting at .9%. Of course, it’s important to remember that these numbers might be adjusted up or down in the future, but they definitely show two quarters of GDP contraction.
The Silver Lining: Employment Levels
Employment levels have steadily been returning to pre-pandemic numbers, with the June unemployment rate remaining at 3.6%, close to the February 2020 pre-pandemic rate of 3.5%. A strong job market continues to be the silver lining in the first half of the year with continued job growth in hospitality, professional services, retail, and the healthcare industry. If the labor market continues to show strong growth, it might lessen the severity of a potential recession.
What Does This Mean for You?
Although we can’t fully know what lies ahead, don’t let that prevent you from taking the steps to protect yourself and pursue financial freedom. At Fiduciary Wealth Management, we can help you navigate your financial challenges and opportunities with confidence. To learn more about our 2022 outlook and how we can help you, schedule a phone call now!
About Rocklin Senavinin, CFP®
With over 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc onLinkedIn or visitwww.fidwm.com. If you have questions, feel free toschedule a phone call using this link.
The views expressed represent the opinions of Fiduciary Wealth Management, LLC and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person.
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