Monday Market Update – July 25

July 25, 2022

Forefront‘s Weekly Market Notes

Big Week of Data

I have circled the week of July 25th on my calendar since the beginning of June. We will see an onslaught of company earnings from Microsoft, Apple, Google, Amazon, and more than a third of S&P500 companies. Q2 GDP will have its first run numbers released on Thursday, and a Fed meeting that should see the Federal Reserve raise interest rates by another 75 basis points (.75%) on Wednesday. Finally, we will get initial jobless claims on Thursday and consumer sentiment readings on Friday. What does all of this data mean, and how does it impact you?

GDP Report 

Everyone in the personal finance world will be watching closely on Thursday Morning as we get the first run of Q2 GDP numbers, which the consensus forecast is to be just over 0% around 0.3% but seeing a negative GDP number is absolutely a possibility, and a more than likely one.

Although the National Bureau of Economic Research is the organization that can officially declare a recession starting or being over, the more widely held belief is any two consecutive quarters of negative GDP means the US economy is in a recession. This will be unlike any recession we have ever experienced, as jobless claims are historically low, and employers continue to hire at a very healthy clip. The United States economy has never had a recession without job losses and an increase in the unemployment rate. Both are moving in the opposite direction; one would think they would move if we were indeed in a recession.

The consumer has undoubtedly slowed down spending during Q2, but during Covid, inventories were depleted, not built up, and it will take time to build up inventory again. A slow down in consumer buying will give companies time to build inventories and not force companies to buy parts and supplies at inflated prices. This is a good thing in the long run.

Earnings and Bond Yields

Companies continue to surprise investors to the upside when reporting earnings, and the consensus earnings growth for the S&P500 is 6.2% based on actual reports and earnings from last week, up from 5.6% the week earlier. This week we see some of the largest companies on the planet report earnings, which will help shape this week’s direction.

As companies continue to surprise with earnings, bond yields continue to slide as investors have quickly pivoted from concerns about persistent inflation to fears of a recession. There is a tremendous amount of data showing a reduction in economic growth which will bring down inflation; I wrote about it in this blog post a few weeks ago. We are getting signs of a rapidly cooling economy; can the Fed get its policy correct?

Your Week in The Market

Expect volatility and a lot of it. The market will change on a dime a few times this week as earnings and economic data are reported. All of the data and information we are receiving help paint a picture and tell a story, but you are the story’s main character, and it does not mean you need to deviate from your plan or do something different than usual. Do not try and react or time the market; that will almost certainly lead to disaster.

Read into the data. Remember, things like CPI data are backward-looking, so telling us information about the April housing market does not matter. Buying a house today differs from purchasing a home back in April. Your monthly payment has changed for one based on mortgage rates nearly doubling.

This week’s amount of data and earnings will be head spinning, but do not let that alter your thinking about your financial plan and situation. Building wealth through investing in the stock market does not work by being reactive to information and data; it only works when you develop your plan by thinking proactively about yourself and the market. If you find yourself panicking or needing cash that isn’t available, this is a failure of planning and a problem that can be easily fixed.

So What?

So how does this impact all of you?

  • There will be a lot of data this week, don’t take it at face value; read into it, or call me, and we can chat about it.
  • The amount of data will make your head spin, don’t react emotionally, you will make a mistake.

Stock market calendar this week:

8:30 AM Chicago Fed national activity index
9:00 AM S&P Case-Shiller national home price index (year-over-year)
10:00 AM Consumer confidence index
10:00 AM New home sales (SAAR)
8:30 AM Durable goods orders
8:30 AM Core capital equipment orders
8:30 AM Advance report on trade in goods
10:00 AM Pending home sales index
2:00 PM Fed funds target rate
2:30 PM Fed Chair Jerome Powell press conference
8:30 AM Gross domestic product, first release (SAAR)
8:30 AM Final sales to domestic purchasers (SAAR)
8:30 AM Initial jobless claims
8:30 AM Continuing jobless claims
8:30 AM PCE inflation index
8:30 AM Core PCE price index
8:30 AM PCE price index (year-over-year)
8:30 AM Core PCE price index (year-over-year)
8:30 AM Real disposable income
8:30 AM Real consumer spending
8:30 AM Nominal personal income
8:30 AM Nominal consumer spending
8:30 AM Employment cost index
9:45 AM Chicago PMI
10:00 AM UMich consumer sentiment index (final)
10:00 AM UMich 5-year inflation expectations (final)

Most anticipated earnings for this week:

About Amit: I am a first generation American, the son of a working-class Indian family, and I lived through my parents’ struggle to find their place in this country, to put down roots that would sustain them as well as their children in a new land. As they encouraged me to excel in school and fostered my hobbies and interests, I was keenly aware of the dynamic between them. I understood that there was a difference between where they came from individually and where we were now. They worked hard in their individual capacities, but they weren’t always on the same page about financial issues – and that can make or break a family’s future. I didn’t know it at the time, but this laid the groundwork for my passion towards financial services and helping families succeed.