Nobody is happy, but Americans are feeling more optimistic.
Last week, headlines blasted the new inflation numbers. Prices were up more than 9% year-over-year in June, according to the Bureau of Labor Statistic’s Consumer Price Index (CPI). When you dig into the numbers, energy prices were up 41.6 percent year-over-year and food prices were up 10.4 percent.
“Prices are rising just about everywhere in the world, in part a consequence of Russia's invasion of Ukraine, which has elevated energy and food prices, and in part because of the supply chain bottlenecks that have driven U.S. prices up,” reported Paul Wiseman of U.S. News & World Report.
The U.S. inflation numbers caused markets to tumble early in the week as investors speculated about whether the Federal Reserve would decide to raise the federal funds rate at a faster pace at its next meeting, reported Ben Levisohn of Barron’s.
Then the retail sales and consumer sentiment data arrived.
After adjusting for inflation, retail sales slowed in June, just as they had in May, reported Megan Cassella of Barron’s. Retail sales data are a leading indicator, meaning they provide information about what may be ahead, while the CPI is a lagging indicator that provides information about what has already happened. Slower retail sales suggest demand is falling and lower prices may be ahead. The news cooled some investors’ rate-hike concerns.
On Friday, the University of Michigan’s Consumer Sentiment Survey showed a modest improvement. Barron’s reported, “…consumer sentiment that had hit an all-time low in June improved slightly in July, likely a reflection of the recent fall in gas prices. And long-term inflation expectations dropped modestly over the month as well. Together, the latest data shows early signs that the Federal Reserve is making progress in its quest to cool the economy.”
Last week, Barron’s reported that major U.S. stock indices declined. Yields on shorter maturity Treasuries rose last week, while yields on longer maturity Treasuries fell.
|Data as of 7/15/22||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 Index||-0.9%||-19.0%||-11.4%||8.6%||9.5%||11.1%|
|Dow Jones Global ex-U.S. Index||-2.6||-22.2||-23.5||-1.6||-0.8||2.5|
|10-year Treasury Note (yield only)||2.9||N/A||1.3||2.1||2.3||1.5|
|Gold (per ounce)||-1.8||-6.3||-6.5||6.5||6.7||0.7|
|Bloomberg Commodity Index||-2.1||14.4||20.6||12.1||6.5||-2.2|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
WHAT’S THE DIFFERENCE BETWEEN MARKET VOLATILITY AND RISK? Smooth sailing isn’t a term anyone would use to describe 2022. So far, it has been a remarkably volatile year. On more than half of the days during the second quarter of 2022, the U.S. stock market moved up or down by 1 percent or more. “The quarter had 10 days where the market moved 2% or more compared to a median of two days between 2019 and 2021,” reported Lauren Solberg of Morningstar.
While volatility is not the same as risk, the chances of incurring a loss may increase during periods of market volatility, in large part, that’s because investors become anxious about falling share prices and sell when they might be better off holding. See what you know about the difference between risk and volatility by taking this brief quiz.
If you’re feeling overwhelmed and uncertain in this volatile market environment, give us a call. One of the most important services we offer is helping people stay calm and make sound decisions during difficult times.
Weekly Focus – Think About It
“Being aware of challenges doesn't make them sting less, but once you see them, you can assess the best way to handle them.”
—Mellody Hobson, CEO and financial educator
Answers: 1) c; 2) d; 3) c; 4) c
https://www.barrons.com/articles/stock-market-had-finished-up-on-friday-its-still-a-bear-market-51657929639?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/07-18-22_Barrons_Dont%20Get%20Your%20Hopes%20Up%20Stocks%20Are%20Still%20in%20a%20Bear%20Market_3.pdf)
https://www.barrons.com/articles/retail-sales-michigan-consumer-sentiment-report-economy-51657878999 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/07-18-22_Barrons_Retail%20Sales%20Actually%20Slowed%20Down%20What%20It%20Means%20for%20the%20Fed_4.pdf)
http://www.sca.isr.umich.edu (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/07-18-22_Surveys%20of%20Consumers_Preliminary%20Results%20for%20July_6.pdf)