Weekly Market Report: July 1, 2022

In a week that saw the S&P 500 wrap up its worst first half in over 50 years (1970), equity  markets delivered a fourth losing week out of the past five, remaining squarely in bear market territory as investors continue to look for guide posts in the second half. The week brought us some highly anticipated economic data on inflation, housing, and consumer confidence. U.S. equity markets were off approximately 2.3% while non-U.S. markets fell 1.7% with weakness again in technology/consumer and strength in utilities/energy. Bonds rallied sharply as interest rates fell again, leaving the 10yr now back below 2.9% while commodities lost 2% and the USD rallied 0.9% in a flight to safety bid.

Market Anecdotes

  • With the second quarter and first half officially in the books, it warrants acknowledging the historic stock, bond, and commodity market returns thus far in 2022.

  • The S&P 500 has repriced itself by -24% in P/E multiple terms heading into 2Q earnings season where consensus 2022 earnings sit at $229.23, a 10% increase over 2021 earnings.


  • The notable change in Fed focus and tone in mid June when officials noted “economic activity appears to have picked up” has become more curious given the slowdown in both economic and inflation data. The paths of inflation and rate hikes remain pivotal input for risk assets.


  • The outlook remains very unclear with the bullish view that $2.2t in savings will provide a significant boost to consumption offset by the bearish view that inflation is exacting a damaging impact on purchasing power and real consumption.


  • The shift in consumption from goods (-$43b) to services (+$76b) continued in May which should be helpful for inflation pressures but it remains unclear whether the increase spend on services will offset declining demand for goods.


  • Probability that the U.S. economy is in recession continues to increase with the most recent Atlanta Fed GDP Now model estimating a 2.1% contraction, following Q1’s 1.6% decline.


  • A look at the yield curve shows both the 10yr-3m and 10yr-2yr slopes are still in positive territory but the 10yr-2yr is approaching the 0% threshold.

Economic Release Highlights


  • PCE headline inflation for May came in MoM at 0.6%a vs 0.7%e and YoY at 6.3%a vs 6.5%e while core inflation registered MoM at 0.3%a vs 0.4%e and YoY at 4.7%a vs 4.8%e.


  • Personal Income and Outlays report for May reported underwhelming consumption expenditures (0.2%a vs 0.5%e) and at consensus personal income (0.5%a vs 0.5%e).


  • The June ISM Manufacturing Index came in slightly under consensus (53a vs 55e) but did fall within the broader consensus range of 52 to 56.


  • Durable Goods Orders for May came in above consensus (0.7% vs 0.1%). Ex-Transportation (0.7% vs 0.4%) and Core Capital Goods (+0.5%) were also relatively strong.


  • Pending Home Sales Index for May of 0.7% beat the consensus call of -2.5% and registered above the high end of the range of estimates (-4.5% – 0.0%).


  • Case-Shiller Home Price Index for April came in at consensus 1.8% MoM and 21.2% YoY price increases.


  • Consumer Confidence for June of 98.7 came in slightly below expectations of 101.0 but fell within consensus range of 95.0-104.0.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.

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