The tail end of July saw the market rally on the heels of a second consecutive 75-basis point hike by the Fed. The S&P 500 climbed an impressive 9.1% over the course of July, signaling its greatest monthly gain since November 2020. This market improvement comes in the wake of worrisome reports surrounding inflation and slowing GDP growth, which continue to stoke recession fears among economists and institutional investors alike. US Labor Market Powers Ahead Widespread hiring gave rise to more positive investor sentiment as we saw employers add 372,000 jobs in June, keeping in line with months prior. Unemployment remained unchanged for the second straight month after clocking in at 3.6%, slightly higher than the 50-year low recorded in September 2019 (3.5%). Equity and Bond Markets Rally The equity markets reacted positively to promising job reports and a growing sense that fiscal policy could loosen once inflation is brought back under control. The housing market stalled, however, as the effects of rising interest rates began to be felt throughout the real estate sector. In the most recent report, June home sales declined from 541,000 to 514,000, representing a 4.99% decrease month-over-month. In conjunction with the broader equity markets, bonds also staged a comeback in July as risk-on sentiment drove the 10-year benchmark from its previous high of 3.5% in June to a more modest 2.65% at month’s end, returning to levels last seen in April. Recession Watch Since the new year, we’ve witnessed two consecutive quarters of negative economic growth—with declines of 1.6% in Q1 and 0.9% in Q2. While these reports have historically been indicative of a recession, economists also acknowledge that these measures fail to account for the fact that market dynamics are shifting and employment statistics continue to beat expectations. If this is indeed a recession, it looks to be a milder one than previously anticipated. Moving into August, and as we continue to observe mixed signals surrounding the possibility of an impending recession, all eyes are on the upcoming CPI and unemployment reports, scheduled for release on the 10th and the 19th, respectively. Chairman Powell and the Federal Reserve Committee made it clear in their latest press conference that further adjustments to fiscal policy will be heavily colored by persisting economic data. Expect this decision to come in the latter half of September. Action Steps Taken this Month: -Cautiously putting some higher cash positions back to work
If you are unsure of how today’s economic conditions could impact your investment portfolio or your larger financial plan, please reach out to schedule a call with us. We are always happy to assuage your concerns and help ensure that your long-term goals remain intact.
Best Regards, Arthur Strauss, CFP® President & CEO www.straussfinancial.com
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