MarketBites: Worst Start For Equities In 52 Years
Portfolio Manager Commentary:
It is official! This is the stock market's worst first half of the year performance since 1970. Treasury 10-year yields dropped to 3% from a decade high of 3.5% just 15 days ago, while the dollar just closed its best quarter since 2016.
The selloff was driven by weaker than expected consumer spending data. U.S. consumer spending fell for the first time this year, suggesting that the economy might indeed be headed into a recession.
As recession or stagflation fears spread across the market, it is important to remember that the U.S. economy and the stock market have both triumphed over much worse times. In the first 6 months of 1970 the market slumped similarly to 2022, but then proceeded to almost fully recover by the end of that year.
Chart of the Day:
An interesting snippet from Bloomberg and JPMorgan on the wave of earnings revisions that are hitting companies: This is significant because it is telling us that stocks might not be as cheap as they look. Yes, stock prices have come down, but underlying company earnings are still priced as if we are in a bull market. If the earnings come down, stock prices will have further to fall.
Source: Bloomberg & JP Morgan