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WEEKLY MARKET COMMENTARY | JUNE 30, 2022
Last week, bad news was good news.
Consumers were feeling blue in June, according to the University of Michigan Consumer Sentiment Survey. The survey scored sentiment at 50, which was the lowest level on record. Surveys of Consumers Director Joanne Hsu reported that 79 percent of consumers anticipate business conditions will decline during the next 12 months, and almost half indicated they are spending less because of inflation.
Consumer pessimism was reflected in the S&P Global Flash US Composite PMI™. The Index measured that manufacturing growth was at the lowest level in almost two years. “Declines in production and new sales were driven by weak client demand, as inflation, material shortages and delivery delays led some customers to pause or lower their purchases of goods,” reported S&P Global. The Index was at 52.4. Any reading above 50 indicates growth.
Unhappy consumers and slower growth in manufacturing can actually improve investor sentiment. Lower consumer confidence is often a signal that stocks are about to head higher. So, if consumers begin to spend less and economic growth slows, then the Federal Reserve may slow its rate hikes or raise rates by less. Last week Fed Chair Jerome Powell told Congress:
“The tightening in financial conditions that we have seen in recent months should continue to temper growth and help bring demand into better balance with supply…Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”
Despite their pessimism, consumers’ expectations for inflation moved lower in June. They anticipate inflation will be about 5.3 percent in the year ahead, and in the range of 2.9 percent to 3.1 percent over the longer term.
Last week, major U.S. stock indices rallied, reported Emily McCormick of Yahoo! Finance. Yields on shorter maturity Treasuries moved higher last week, while yields on longer maturity Treasuries moved lower.
Sources:
http://www.sca.isr.umich.edu (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/06-27-22_Surveys%20of%20Consumers_Final%20Results%20June%202022_1.pdf)
https://www.pmi.spglobal.com/Public/Home/PressRelease/8fd15c4803fd4399bea8d16e1dc06422
https://www.federalreserve.gov/newsevents/testimony/powell20220622a.htm
https://finance.yahoo.com/news/stock-market-news-lives-updates-june-24-2022-113334665.html
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202206
https://www.economist.com/graphic-detail/2022/06/22/the-worlds-most-liveable-cities (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/06-27-22_The%20Economist_The%20Worlds%20Most%20Livable%20Cities_6.pdf)
https://www.brainyquote.com/quotes/georgia_okeeffe_138692?src=t_city
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Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
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