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Our 2022 Mid-Year Market Update

Our 2022 Mid-Year Market Update

August 11, 2022
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Economic uncertainty plagued the start of 2022, and it has not eased. The continuing ripple effect of the global pandemic, historic inflation, a waning housing market, and the ongoing war in Ukraine are all contributing factors to the current state of the economy. All of this has most people wondering, where are we headed?

While there are still many unknowns, we’d like to take the 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 (9.1% for the 12 months ended June 2022). (1)

The S&P 500 is now officially in a bear market, defined as a 20% decline from a recent peak. (2) Many experts differ in their opinion on whether we are currently in a recession, however, most can agree that a recession is coming to the United States. In Canada, inflation is running at its fastest pace since 1983. In the United Kingdom, it is similarly at a 40-year-high. (3)

This year has seen concerns regarding the global economy reach new highs as many countries struggle in different ways:

  • COVID-19 surges in China have stalled manufacturing 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 by 0.75%, the fourth rate hike this year and the largest consecutive increase since the 1980s. (12) As alarming as this already is, further raises are expected. Federal Reserve President James Bullard has stated another 1.5% in rate hikes will occur by the end of 2022. (13)

There is healthy debate among experts 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.”

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. If you don’t have a financial partner to help you weather these uncertain times (and whatever lies ahead), we at GLH&C Financial Services offer experienced and objective advice, while putting our clients’ best interests first at all times. We can come alongside you as we navigate your financial challenges and opportunities with confidence. To learn more about our 2022 outlook and how we can help you, email me at jim@glhcfinancial.com or give me a call at 916-276-8677.

About Jim

James Callens is a financial advisor at GLH&C Financial Services, a full-service, comprehensive wealth management firm. Jim has over 30 years of experience in the financial industry and uses his extensive resources and knowledge to help his clients experience simplicity and clarity in their financial lives. Jim spent more than 20 years working for GE Financial Advisors, both in its insurance services department and as a regional manager and financial advisor. He took part in GE’s Six Sigma Quality Training program and completed the National Association of Life Underwriter’s four-year LUTCF course. Jim also earned his certificate in financial planning from the University of California at Davis. In 2011, Jim combined his own firm, Callens Financial Group, with GLH Financial Services, creating GLH&C Financial Services, so he could provide even more value to his clients. 

He has served as a board member for several nonprofit organizations and has been involved in Cub Scouts leadership and youth sports coaching. Jim lives in Folsom, California, with his wife, Melissa, and his four children, Jacob, Kristen, Grant, and Andrew. Together, they enjoy outdoor activities like kayaking, bicycling, and vacationing at Lake Tahoe. To learn more about Jim, connect with him on LinkedIn.

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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://asiatimes.com/2022/08/tackling-the-global-inflation-crisis/

(4) https://www.reuters.com/markets/asia/chinas-factory-activity-contracts-unexpectedly-july-official-pmi-2022-07-31/

(5) https://www.ft.com/content/901d183d-8acd-4885-bd76-e80f9a893a96#post-f8f76baa-95f5-4f1f-b27a-ccf6b9c365b3

(6) https://www.cnbc.com/2022/08/01/66percent-worry-a-recession-is-coming-what-concerns-each-generation-most.html

(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://www.nbcnews.com/business/economy/federal-reserve-raises-key-interest-rate-to-fight-inflation-rcna40142

(13) https://www.cnbc.com/2022/08/03/feds-bullard-sees-more-interest-rate-hikes-ahead-and-no-us-recession.html