Weekly Update: July 18: Click here to read reasons for optimism as second half gets underway

Posted on August 4, 2022
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By Debra Taylor, CPA/PFS, JD, CDFA™

Dear Friends,
There is a lot of pessimism in the markets right now. We know the list of concerns is long and includes an aggressive Federal Reserve agenda with a not-so-soft approach to a soft landing. Stagflation, ongoing China lockdowns, disrupted supply chains, exaggerated earnings estimates, and of course the ongoing Russia-Ukraine war, are all reasons for concern.
The chart below shows us 60 years of historical data on how stocks have bounced back strongly after two-quarter drops, like we’ve just experienced in the first half of 2022. If history is to repeat itself, we can expect an average gain of 21.5% in the final two quarters. Although we cannot predict the future, it does help to provide some reassurance that better days are on their way.

And good change may be coming soon. July has tended to be a good month for stocks. Over the last decade, the S&P 500 gained an average of 2.5% in the month of July, only marginally behind April & November – the best performing months.
The much anticipated earnings season is here, and it will provide critical guidance either way. The next round of inflation data, third-quarter earnings, and updates from the Federal Reserve, will help to determine whether July follows its typical pattern of stock market gains. Regardless, we like our odds. Remember, shallow bear markets like we’ve had so far, tend to bottom in about seven months on average. Month seven is July. It may be too soon to call a bottom, but history seems to be on the bulls’ side.
Please reach out with any questions.
Debbie
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