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Weekly Economic Update: June 28th, 2022

June 28th, 2022

Weekly Market Update

In this week’s recap: Stocks rally, despite recession concerns.

The Week on Wall Street

Prospects of cooling inflation powered a rally in stock prices last week despite growing recession concerns.

The Dow Jones Industrial Average gained 5.39%, while the Standard & Poor’s 500 climbed 6.45%. The Nasdaq Composite index rose 7.49% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged 0.78% higher.^1,2,3

Stocks Bounce

Declining energy and food prices and falling bond yields signaled a potentially improving inflation outlook, buoying investor sentiment. The rally in stocks was most powerful on the first and final trading days of a holiday-shortened week. Stocks turned a bit choppy mid-week as investors digested Fed Chair Jerome Powell’s Senate appearance but resumed their momentum on Thursday and rallied Friday as rate-hike expectations eased.

Though the weekly gain was a welcome respite from the market’s downward trend, declining bond yields and falling food and energy prices can also be interpreted as signs of slowing economic growth, which may represent a headwind for corporate earnings in the months ahead.

Powell Testifies

Fed Chair Jerome Powell told members of the Senate Finance Committee that the Fed is committed to lowering inflation and moving quickly to do so. He conceded that a recession could result from the Fed’s inflation-fighting efforts and acknowledged that some of the forces driving inflation (e.g., supply chain, war) are out of the Fed’s control.⁴

Perhaps the most exciting part of his testimony was what he didn’t say, which was a definitive statement on future hikes. Instead, Powell told lawmakers that he “anticipate[s] that ongoing rate increases will be appropriate.” Before his testimony, the Fed published a new research paper that found a greater than 50% chance of recession in the next four quarters.⁵

Tip of the Week

A good will should propose at least a few executors, as there is always the possibility that your first choice for executor might not outlive you.

Radio

Time Change! Retire Ready with David Nicholas will now be airing on Saturdays at 6:00 PM on 95.5 WSB. Be sure to tune in this weekend! If you missed this past weekend's show, CLICK HERE to listen!

Media

Be sure to subscribe to our YouTube page for all of David’s media commentaries CLICK HERE!

[yotuwp type="videos" id="HtyQ_x3Ou2g" ]

Interest rates should continue to rise. For every 1% rise in interest rates = 24% earnings increase for financials. David Nicholas joined Stuart Varney on Fox Business on 6/27 to explain why financials could be the market's big winners in the second half of the year.

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