At TM3 Wealth, it is important to us that you are well informed about what is happening in the markets. Here are a few of the key topics of conversation that we feel deserve the most attention this month. If you have any questions or would like to continue the conversation, let us know, and we appreciate the opportunity.
On June 13th, the S&P 500 officially entered bear market territory, defined as a pullback of at least 20%1. While global capital markets have been volatile all year, crossing these man-made thresholds has the potential to create additional anxiety and nervousness, generating a lot of headlines and inevitably talks of the rising risks of a recession to go along with the discussions around stubborn inflation and the path forward for the Federal Reserve that we have become accustomed to lately. Though it is notable that aside from the pandemic-related pullback in March 2020, the last time the S&P 500 entered bear market territory was over a decade ago in August 2011.
While the consumer was one of the strongest parts of the economy in the first quarter, with personal consumption rising 3.1%2, there may be some initial signs of that cooling. Retail sales fell 0.3% in May3, which was the first monthly decline of the year as consumers pulled back spending on most non-essential goods, with furniture, electronics, and online shopping hit the hardest as consumers’ resilience in the face of higher prices appears to wane.
Further, April’s rebound in consumer confidence appears to have been short-lived, with the University of Michigan’s Consumer Sentiment Index slumping to a record low in May’s preliminary release4. The impact of, and fears of continued inflation, continue to batter sentiment, with 46% of respondents attributing their negative views to inflation. The inflationary picture also worsened in May, with the Consumer Price Index rising 8.6% over the prior year, up from the 8.3% annual increase in April3. In brighter news, core inflation, which excludes food and energy, did continue to cool down, rising 6% over the last year versus the 6.2% and 6.5% increases in April and March, respectively.
Following their June policy meeting, the Federal Reserve moved more aggressively to tackle inflation by raising rates 75 basis points, the largest increase in the benchmark rate since 1994. In his press conference, Fed Chairman Powell indicated that a 50 to 75 basis point increase is on the table for their next meeting in July as well, but that he does “not expect moves of this size to be common.” The market’s reaction was cautiously optimistic, with the S&P 500 increasing 1.46% on the day of the announcement and yields on 2-year and 10-year US government bonds falling. As with earlier this year, expectations around inflation and Fed policy continue to shift and adjust to the latest data, occasionally sparking periods of volatility across global capital markets.
The bottom line: Volatile market performance, coupled with potentially softening economic data, is worrisome. However, we’ve seen how markets and economics have the potential to turn around quickly and return to growth mode. We will continue to follow the data and utilize it to make prudent portfolio decisions, though markets may continue to be choppy in the months ahead.
—
Sources:
1. Bloomberg
2. Bureau of Economic Analysis
3. Census Bureau
3. Bureau of Labor Statistics
4. University of Michigan
Disclosures
The material presented includes information and opinions provided by a party not related to Thrivent Advisor Network. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent Advisor Network or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products, securities, or services. They also do not include all fees or expenses that may be incurred by investing in specific products. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. The opinions expressed are subject to change as subsequent conditions vary. Thrivent Advisor Network and its affiliates accept no liability for loss or damage of any kind arising from the use of this information.
Investment advisory services offered through Thrivent Advisor Network, LLC., a registered investment adviser and a subsidiary of Thrivent. Clients will separately engage a broker-dealer or custodian to safeguard their investment advisory assets. Review the Thrivent Advisor Network ADV Disclosure Brochure and Wrap-Fee Program Brochure for a full description of services, fees, and expenses. Thrivent Advisor Network LLC advisors may also be registered representatives of a broker-dealer to offer securities products.
This communication may include forward looking statements. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could’” or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to differ materially.
Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of consumer confidence levels in the United States conducted by the University of Michigan.
The S&P 500® Index, or the Standard & Poor’s 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
TM3 Wealth is a part of Thrivent Advisor Network, LLC (“Thrivent”), a Registered Investment Adviser (“RIA”), located in the State of Minnesota. Thrivent provides investment advisory and related services for clients nationally. Thrivent will maintain all applicable registration and licenses as required by the various states in which Thrivent conducts business, as applicable. Thrivent renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or pursuant to an applicable state exemption or exclusion.
Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. TM3 Wealth and Thrivent Advisor Network, LLC are not affiliated companies. Information in this message is for the intended recipient[s] only. Please visit our website www.tm3wealth.com for important disclosures.
