Weekly Market Review - June 6, 2022

If you paid attention to nothing about the stock market last month only to look at the S&P 500’s return of 0.2%, you would think it was a rather dull four weeks. That could not be further from the truth. After an intramonth drawdown of over 9%, the S&P 500 Index flirted with bear market territory, defined as a 20% decline since the index’s last high. Thanks to a one-week rebound of 6.6% to end the month, the S&P eked out a monthly gain of 0.2%, hiding the fact that volatility was a dominant theme during May trading. Although we avoided the official declaration of a bear, risks remain as the market continues to trade on headlines, mainly those surrounding inflation.

May provided a bit of everything for markets to react to, though all came back to a common theme of rising prices. Investors cheer anytime the Federal Reserve clearly states its current priority is taming inflation, only for those concerns to resume over whether the Fed can deliver its promises of a soft landing. If the Fed was not enough, companies reminded investors of rising costs throughout the month. A few consumer staples companies significantly cut their forward outlooks due to rising costs and shifting in demand, as consumers rotate to necessary goods at the expense of discretionary items.

The rally to end the month was driven by a several factors, though not much different from above. The month ended with positive company earnings and outlooks from stores like Dollar General and Ross Stores. Both focus on the lower-end consumer and are poised to benefit from consumers’ rotating to staple items. Despite changing spending habits, consumer spending was once again strong last month. However, consumers did dip into savings, pushing the savings rate to the lowest level in 14 years.

The risk here is that the longer inflation remains elevated, the greater the impact rising costs and dwindling savings will have on lower-income households.

Another month of 2022 has passed, and it remains unclear where the markets may go from here. Investors may find themselves frustrated while looking at account statements only to see equity and fixed income investments in the red; unfortunately, there are no quick fixes. Rebalancing is difficult when equities and bonds are both down. So far, the only positive performers for the year are commodities and energy, which were the hated laggards of the last decade. Nevertheless, positives do remain. Tax losses can be harvested on both equity and fixed income investments and reinvested in either higher-yielding bonds or lower-valued equities. While options may be limited, patience remains critical. This is a short-term speed bump on the path to long-term financial goals.

Author: Joe Clark, CFA | Research Team | Allegheny Financial Group | June 2022

The information included herein was obtained from sources which we believe reliable. This report is being provided for informational purposes only. It does not represent any specific investment and is not intended to be an offer of sale of any kind. Past performance is not a guarantee of future results.

Allegheny Financial Group is a Registered Investment Advisor. Securities offered through Allegheny Investments, LTD, a registered Broker/Dealer. Member FINRA/SIPC.