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Our 2022 Mid-Year Market Update

Our 2022 Mid-Year Market Update

| August 02, 2022

These last two years have been truly unprecedented. While governments struggled to keep their citizens alive and economies running during the pandemic, the markets seemed unaffected, with the S&P 500 gaining 26.9% in 2021. (1) This year has brought back some semblance of normalcy, with many people returning to the office and even going on vacation abroad. But with unprecedented inflation and a war in Ukraine affecting supply chains, the markets are not responding positively to the recovery from the pandemic.

While there are still many unknowns, let’s take some time to reflect and review what’s happened so far in 2022 and what you can expect going forward.

Stock Market Performance

It’s no secret that the stock market has seen increased volatility in the last couple of months—partly due to geopolitical events and partly due to the continued effects of historically high levels of inflation (9.1% for the 12 months ended June 2022)

With the S&P 500 now officially in a bear market, defined as a 20% decline from a recent peak, (2) experts and some of the country’s top CEOs like Satya Natella and JPMorgan Chase CEO Jamie Dimon are warning that a recession is coming. (3)

This year has seen concerns regarding the global economy reach new highs as many countries struggle in different ways:

  • The ongoing COVID-19 surge in China has prompted fresh rounds of lockdowns and stifled economic growth. (4)
  • The war in Ukraine has triggered a global food shortage, as Ukraine and Russia provide a combined 19.1% of the world’s grains. (5)
  • High inflation in the U.S. is reducing demand for everyday goods and could send the economy into a recession. (6)

There’s no way to know exactly how all these events will unfold, but our best advice is to keep calm throughout the storm. Stock market volatility and even recessions are normal parts of the economic cycle, and sticking with a tried-and-true investment strategy is the best way to navigate uncertain times.

Employment Levels

Employment levels have steadily been returning to pre-pandemic numbers, with the June unemployment rate remaining at 3.6%, unchanged from May. This number, about 6 million people, is similar to the February 2020 pre-pandemic rate of 3.5%, or 5.7 million people. (7)

The payroll employment sector also saw an increase of 372,000 jobs in June, adding gains to the leisure and hospitality, professional services, retail, and healthcare industries. (8)These figures are higher than the 286,000 new jobs expected, suggesting to many experts that the economy as a whole will continue to grow despite high inflation. (9)

Interest Rates and the Federal Reserve

In response to surging inflation, the Federal Reserve raised interest rates by 0.50% in May, then by 0.75% in June, and 0.75% in July which marked the single largest rate hike since 1994. (10) The Fed has promised to raise rates throughout the remainder of 2022.

There is much debate over how much rates should rise in order to effectively combat inflation. Too much of a rise could halt economic recovery, whereas too little could keep inflation rampant and send the economy into a recession. Many experts agree that the Fed still needs to do more to combat inflation. (11)

What Does This Mean for You? 

Although we can’t fully know what lies ahead, don’t let that prevent you from taking the steps to protect yourself and pursue financial freedom. At T.A. Holland & Co., we can help you navigate your financial challenges and opportunities with confidence. To learn more about our 2022 outlook and how we can help you, reach out to us at info@taholland.com or 617-523-5656 to schedule a complimentary appointment.

About T.A. Holland & Co.

T.A. Holland & Co. was founded in Boston, Massachusetts, in 1920, and serves individuals and businesses throughout the country. We provide cutting-edge financial services with a broad array of solutions to help our clients grow and preserve their wealth. We have seen good and bad economic times. Through it all, T.A. Holland & Co. has thrived by always making the customer our #1 priority. We get to know you and understand your needs so we can provide you with the proper guidance and strategies. Our senior vice president, John Hellmuth, has been at the helm of T.A. Holland’s financial services since 1990, but he doesn’t do this job alone. He is joined by his two children, Lindsay Hellmuth and Thomas Hellmuth. As CERTIFIED FINANCIAL PLANNER™ practitioners, our financial services team has the knowledge and experience to help you solve your most pressing financial challenges. To learn more about how we can help you, visit our website and reach out to us at (617) 523-5656 to schedule a complimentary get-acquainted meeting.

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(1) https://www.forbes.com/advisor/investing/stock-market-year-in-review-2021/

(2) https://www.forbes.com/sites/simonmoore/2022/06/23/how-long-might-the-bear-market-last/?sh=4063159b663c

(3) https://www.npr.org/2022/06/14/1104601336/recession-inflation-federal-reserve-ceos-elon-musk-jamie-dimon?t=1655726956345

(4) https://www.theguardian.com/world/2022/jun/27/alarm-in-beijing-after-announcement-zero-covid-policy-may-last-five-years 

(5) https://www.brookings.edu/blog/future-development/2022/06/14/the-war-in-ukraine-triggered-a-global-food-shortage/ 

(6) https://www.washingtonexaminer.com/policy/economy/inflation-jumps-to-9-1-highest-in-four-decades 

(7) https://www.reuters.com/markets/us/us-job-growth-likely-slowed-june-unemployment-rate-seen-36-2022-07-08/ 

(8) https://www.bls.gov/news.release/empsit.nr0.htm 

(9) https://finance.yahoo.com/news/june-jobs-report-july-8-2022-211628954.html 

(10) https://www.cnbc.com/2022/06/15/fed-hikes-its-benchmark-interest-rate-by-three-quarters-of-a-point-the-biggest-increase-since-1994.html 

(11) https://knowledge.wharton.upenn.edu/article/fighting-inflation-why-the-fed-needs-to-be-more-aggressive/#:~:text=In%20order%20to%20combat%20inflation,75%20basis%20points%20every%20quarter