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Our 2022 Mid-Year Market Update

Our 2022 Mid-Year Market Update

July 12, 2022
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We had hoped the unpredictability of the last two years would be over by now. Unfortunately, 2022 has proved itself to be one of the most unpredictable years of this last decade. With a global pandemic still raging on in some parts of the world, a war in Ukraine, an out-of-control housing market, and rampant inflation, there is good reason for many to have concerns about the state of the economy. 

While there are still many unknowns, let’s take some time to reflect and review what’s happened so far in 2022 and what you can expect going forward.

Stock Market Performance

It’s no secret that the stock market has seen increased volatility in the last couple of months—partly due to geopolitical events and partly due to the continued effects of historically high levels of inflation (8.6% for the 12 months ended May 2022). (1)

With the S&P 500 now officially in a bear market, defined as a 20% decline from a recent peak, (2) experts and some of the country’s top CEOs like Elon Musk and JPMorgan Chase CEO Jamie Dimon are warning that a recession is coming. (3)

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. (4)
  • The ongoing war in Ukraine and subsequent sanctions against Russia have intensified supply-chain disruptions and increased prices in the energy, food, and commodity industries. (5)
  • High inflation in the U.S. is reducing demand for everyday goods and could send the economy into a recession. (6)

There’s no way to know exactly how all these events will unfold, but our best advice is to keep calm throughout the storm. Stock market volatility, and even 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.

Employment Levels

Employment levels have steadily been returning to pre-pandemic numbers, with the June 2022 unemployment rate remaining at 3.6%, unchanged from April and May. (7) This number, about 6 million people, is similar to the February 2020 pre-pandemic rate of 3.5%, or 5.7 million people. (8)

The payroll employment sector also saw an increase of 372,000 jobs in June, which was over 100,000 jobs higher than expected estimates. (9) Education and health services were the leading industries for job creation, followed by professional and business services, then leisure and hospitality. (10) The continued growth in the payroll employment sector defies what many experts would expect from an economy headed for recession. (11)

Interest Rates and the Federal Reserve

In response to surging inflation, the Federal Reserve yet again raised interest rates on June 15th by 0.75%, the largest hike in a single meeting since 1994. (12) As alarming as this already is, further raises are expected, up to approximately 3.4% by year’s end. This suggests another 1.75% in total rate hikes, spread across the remaining four scheduled policy-setting meetings this year, a much steeper path of rate hikes than was predicted in March.

There is much debate over how much rates should rise in order to effectively combat inflation. Too much of a rise could halt economic recovery, whereas too little could keep inflation rampant and send the economy into a recession. However, a Fed statement reiterated its resolve to ongoing increases, with Fed Governor Christopher Waller stating he is “definitely in support of doing another 75 basis point hike in July [and] probably 50 in September.” (13)

What Does This Mean for You? 

Not knowing what lies ahead can be unsettling—or even downright scary. Rest assured, we are watching over your portfolios and making necessary adjustments if and when markets dictate. 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 1on1 Financial, 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, call our office today at 909-981-1720 or simply click here to schedule a free 15-minute introductory phone call!

About 1on1 Financial

1on1 Financial is an independent financial advisory firm specializing in guiding working and retired professionals, executives, and business owners along the path to financial well-being. Founded in 1997, we use a team approach to help our clients accumulate wealth, generate income, preserve their life savings, and strategically plan for the distribution of their estate. With more than 50 years of combined experience in the financial services industry, we remain true to our fundamental mission: to provide personalized guidance, treatment, care, and service so our clients can gain control of their future and feel confident in their financial life.

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(1) https://www.usinflationcalculator.com/inflation/current-inflation-rates/

(2) https://www.forbes.com/sites/simonmoore/2022/06/23/how-long-might-the-bear-market-last/?sh=4063159b663c

(3) https://www.npr.org/2022/06/14/1104601336/recession-inflation-federal-reserve-ceos-elon-musk-jamie-dimon?t=1655726956345

(4) https://www.nbcnews.com/news/world/china-shanghai-covid-lockdown-beijing-shuts-districts-rcna32696

(5) https://www.un.org/development/desa/dpad/publication/world-economic-situation-and-prospects-june-2022-briefing-no-161/

(6) https://www.bloomberg.com/news/articles/2022-07-01/summers-says-risk-of-2022-recession-climbing-may-damp-inflation

(7) https://www.cnbc.com/2022/07/08/jobs-report-june-2022-.html

(8) https://www.bls.gov/news.release/empsit.nr0.htm

(9) https://www.cnbc.com/2022/07/08/jobs-report-june-2022-.html

(10) https://www.cnbc.com/2022/07/08/jobs-report-june-2022-.html

(11) https://www.cnbc.com/2022/07/08/jobs-report-june-2022-.html

(12) https://finance.yahoo.com/news/fed-fomc-monetary-policy-decision-june-2022-120337242.html

(13) https://www.cnbc.com/2022/07/07/fed-officials-waller-and-bullard-back-another-big-interest-rate-increase-in-july.html