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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of June 30, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. 

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 
This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by Brian Ullmann and LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

The advisors of Ford Financial Group are Registered Representatives with and securities are offered through LPL Financial member FINRA/SIPC. Investment advice offered through Ford Financial Group, a registered investment advisor, and a separate entity from LPL. Tracking 1-05292601

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This week, Brian talks about how a historically weak quarter, six months, and year for stocks, bonds, and the two combined is now behind us. 

With stocks and bonds both showing weakness, not surprisingly a 60/40 balanced portfolio that combines the two has also shown weakness. ASince 1976 (the inception of the Bloomberg U.S. Aggregate Bond Index), the second quarter of 2022 was the fifth worst for the S&P 500 Index (“S&P 500”), the fourth weakest for the Bloomberg U.S. Aggregate Bond Index (“Agg”), but the worst quarter for a combination of the two, using a mix of 60% of the S&P 500 and 40% the Agg.

Yet, stocks have historically bounced back strongly from big 2-quarter drops as we just experienced. In fact, after a more than 20% drop over 2 quarters (the S&P 500 Index fell 20.6% in the first half of 2022), the average gain the next 2 quarters has been 21.5%.

Chart: Stocks After Big 2 Quarter Drops

Chart: July one of the strongest months over the last decade

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Last week the Federal Reserve announced its first 0.75% move since November 1994. The possibility of a 0.75% hike seemed unlikely even a week ago, but an upside surprise in the latest reading of Consumer Price Index (CPI) index inflation, released on Friday, June 10, changed everything as short-term yields soared and market-implied rate hike expectations climbed higher.

This week Brian talks about how the Fed still has to remain credibly committed to bringing down inflation and how it's not an easy fit between what they may have to do to bring down inflation and the soft landing they’re trying to achieve. 

Bad Half Chart

Bad Quarter Chart

Bad Weeks Chart

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In this bonus episode, Brian discusses some of the questions asked of him in a recent interview relating to the stock market drop, bear markets, recessions, inflation, and interest rates.

Check out the interview here:  CBS47 Interview

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Stocks rallied hard the prior week week, as the S&P 500 Index broke a seven week losing streak in resounding fashion; its 6.6% gain was the best since November 2020. That strong response from equities, following one of the worst starts to the year ever, has many investors questioning, “Was that the low?” While we are certainly open to that possibility, Brian takes a look at why the technical picture suggests volatility is likely to remain elevated in the near term.

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Chart: S&P Resistance

Chart: Midterm Year Bottoms

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While the S&P 500 Index has not officially entered bear market territory, plenty of areas of the market have. This week, Brian talks about how the consumer discretionary sector is one of them with a 35% drop from its November 2021 high. And as we heard from some of the biggest retailers during earnings season, the outlook is only getting tougher as energy prices soar and supply chain problems persist.

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Chart: Worst Earnings Season for Consumer Discretionary

Chart: Consumer Discretionary Valuation Compared to S&P 500

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It’s been a tough year so far for a traditional “60/40” portfolio, a portfolio of 60% stocks and 40% bonds. Using the S&P 500 Index and the Bloomberg U.S. Aggregate Bond Index (“Agg”) to represent stocks and bonds, the traditional 60/40 is down 14.0% as of market close on May 11 on a total return basis, which would trail only 2008 as the worst year on record if that’s where we ended the year, but this week Brian explains how the 60/40 portfolio is diversified, and why this recent correction in stocks and bonds set up for a positive outlook for the future.

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This week Brian gets down to business and talks about the likelihood of a recession this year. Not all recessions are created equal. Previous downturns in the U.S. were prompted by various shocks, with the most recent recession started by health and government-induced shutdowns. Other recessions started in the corporate sector, whereas some started from commodity shocks. The next one could start from geopolitical tensions. Nonetheless, we think the current business and consumer environments are safe from near-term recession risks.

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Music:
Cold Funk - Funkorama by Kevin MacLeod is licensed under a Creative Commons Attribution license. Source. Tracking ID: 1-05271721

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the view s or strategies discussed are suitable for all investors or w ill yield positiv e outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. 

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities . 

All information is believed to be from reliable sources; how ever, LPL Financial makes no representation as to its completenes s or accuracy. 

The U.S. Institute for Supply Managers (ISM) manufacturing index is an economic indicator derived from monthly surveys of private sector companies, and is intended to show the economic health of the U.S. manufacturing sector. A PMI of more than 50 indicates expansion in the manufacturing sector, a reading below 50 indicates contraction, and a reading of 50 indicates no change. 

ISM Non-Manufacturing PMI (Services) is based on surveys of more than 400 non-manufacturing firms’ purchasing and supply executives. 

All index data fromFactSet.

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For the third straight week, the U.S. market indexes finished lower as the continued Eastern European conflict along with inflation concerns renewed investor worries about future corporate profits.  This week Brian recaps the difficult April for markets, and how bonds may not be offering the protection some investors are looking for.

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Music:
Cold Funk - Funkorama by Kevin MacLeod is licensed under a Creative Commons Attribution license. Source. Tracking ID: 1-05266391

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