Dear Clients,
I hope you enjoyed the summer season—whether that be relaxing, traveling, or spending quality time with family and friends. At MWM, we had our busiest summer to date working on our conversion to becoming a Registered Investment Advisor (RIA). I’m pleased to announce that as of last Friday, August 19th, the conversion is complete, with all team members, myself included, having transitioned to the BNY Mellon | Pershing Platform. I would like to express my sincere gratitude for your patience during this process. As we enter this new chapter as an independent firm, I’m humbled by your loyalty. I couldn’t be more excited for what the future holds. This milestone reaffirms our commitment to offering industry-leading investment solutions and personalized customer service that always puts you, our clients, first and foremost.
This summer, the markets continue to be at the mercy of the Federal Reserve and inflation readings. After reaching a bottom in mid-June, stocks rallied upon softer-than-expected CPI data. Speculative investors are betting Jerome Powell will not raise interest rates in September as inflation shows signs of waning. Conversely, we believe this optimism is short-sighted. CPI data marginally decreased in July primarily due to declining oil prices, which dropped 7.7% compared with June. Because inflation remains abnormally high across most categories, we believe the Federal Reserve will stay the course and raise interest rates in September. We recommend our clients remain invested as we believe there could be a rally during the fourth quarter. Our economic commentary explains why we believe this is the case.
As always, please contact our office if you have any questions or if we may be of help in any way. It is our privilege to be of service to you and your family.
Mid-year thoughts on the market
The Summer is often a time to relax and recharge the batteries. The global markets, however, completely missed this memo. The first six months of 2022 were the stock market’s weakest start to the year since 1970. The S&P 500 had dropped 23% YTD as of June 16th, and the technology heavy NASDAQ dropped 32%. Since then, the market has rallied, recouping over 50% of its losses. Given the intense roller coaster ride in the markets so far in 2022, we thought it would be helpful and instructive to take stock of where we are today and where we may be headed.
The Fed and Inflation
Inflation, a word not used in almost 40 years, is front and center as it dominates the news cycle. In June, the Consumer Price Index (CPI) hit a 41-year high at 9.1%. This acceleration is even more staggering when considering that inflation was just 3.9% in 2020 and 2.3% before the pandemic hit. Market sentiment turned extremely negative in Q2 as investors digested the stark possibility that the Fed had lost total control of inflation, precipitating the almost 24% drop in the S&P 500 from early April through mid-June. Since then, inflation has ticked down slightly in July to 8.5% as prices showed signs of cooling but remain near record highs. This led to a strong market rally since June 16th, particularly in technology stocks and speculative lower-quality companies. Investors are betting the Fed will make a dovish pivot
and not raise rates in September. However, we believe this optimism is likely premature, and the Federal Reserve will continue its hawkish hike cycle as it tries to tighten financial conditions to tame inflation…
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