The Markets

Rally caps were waving.

In recent weeks, investors have embraced the idea that economic data will persuade the Federal Reserve to slow the pace of rate hikes. Last week’s inflation data fanned their enthusiasm.

The big news was that the Consumer Price Index (CPI), which measures inflation, didn’t change from June to July. That doesn’t mean all prices remained the same during the month. They didn’t. For instance, the cost of energy dropped by 4.6 percent, while the cost of food rose by 1.1 percent. When all price changes were combined, the overall result was zero percent inflation for July. Year-to-year, though, the CPI was up 8.5 percent.

Investors didn’t care that a single month is not a trend, and stocks moved higher. “The gains this week continue a longer run for the stock market, which had already been optimistic that evidence would point to peak inflation… The hope is that cooling inflation will make the Federal Reserve more likely to slow down the pace of interest rate hikes,” reported Joe Woelfel and Jacob Sonenshine of Barron’s.

“That narrative got another boost Thursday. The producer price index for July gained 9.8% year-over-year, below expectations for 10.4% and below June’s result. That further validates the peak inflation thesis, as companies would raise prices at a slower pace, given that their costs are rising at a slower pace.”

The bond market was less optimistic about what the future may hold. The U.S. Treasury (UST) yield curve steepened after CPI data was released, which suggests some optimism about the future. However, the curve remained inverted, suggesting that bond investors think the current Federal Reserve policy – raising rates and tightening monetary policy – may eventually lead to a recession, reported Liz McCormick of Bloomberg.

Bloomberg’s July survey of economists put the chance of a recession within the next year just below 50-50, reported Vince Golle and Kyungjin Yoo.

Last week, the Standard & Poor’s 500 Index delivered a fourth consecutive week of gains, the Dow Jones Industrial Average trimmed its losses for the year, and the Nasdaq Composite was up 20 percent from its June low, reported Andrew Bary of Barron’s.


Data as of 8/12/22 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 Index 3.3% -10.2% -4.1% 14.1% 11.7% 11.8%
Dow Jones Global ex-U.S. Index 2.1 -15.9 -17.7 2.7 0.7 2.8
10-year Treasury Note (yield only) 2.9 N/A 1.4 1.6 2.2 1.7
Gold (per ounce) 1.1 -1.5 2.6 6.0 6.9 1.0
Bloomberg Commodity Index 4.5 24.2 29.7 17.1 8.2 -1.5

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Where Are the Best Places to Live in North America?

This year, the Economist Intelligence Unit conducted a “liveability” study to evaluate which cities around the world had the most to offer residents. They analyzed 30 quantitative and qualitative factors across five categories – stability, healthcare, culture and environment, education, and infrastructure – in 172 cities.

As it turns out North America is the second most livable region of the world, trailing just behind Western Europe. Every North American city in the survey received a score of at least 80 out of 100. The top cities in North America included:

  1. Calgary
  2. Vancouver
  3. Toronto
  4. Montreal
  5. Atlanta
  6. Washington, D.C.
  7. Honolulu
  8. Pittsburgh
  9. Los Angeles
  10. Seattle

The desirability of North American cities may explain why more people are moving to the continent. “Over 630,000 people moved to North America from other parts of the world in the first half of 2022, a rise of 51% from the same period a year earlier,” reported The Economist.

In case you’re wondering, the least livable cities in North America – and no place had a low score – were Lexington, Detroit, Houston, Cleveland and New York.

Where would you live if you could choose anywhere in the world?

Weekly Focus – Think About It

“We all have our time machines, don't we? Those that take us back are memories… and those that carry us forward, are dreams.”

—H.G. Wells, author

Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

  • Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
  • Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
  • The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
  • All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
  • The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
  • The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
  • Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
  • The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
  • The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
  • International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
  • Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
  • Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
  • Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
  • Past performance does not guarantee future results. Investing involves risk, including loss of principal.
  • You cannot invest directly in an index.
  • Stock investing involves risk including loss of principal.
  • The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
  • The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
  • These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
  • This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
  • The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
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Sources:

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.barrons.com/articles/stock-market-today-51660151669 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/08-15-22_Barrons_Dow%20Rises%2c%20Disney%20Surges_2.pdf)

https://www.bloomberg.com/news/articles/2022-08-11/bond-traders-dismiss-stock-market-rally-as-misguided-euphoria?srnd=fixed-income (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/08-15-22_Bloomberg_Bond%20Traders%20Dismiss%20Stock-Market%20Rally%20as%20Misguided%20Euphoria_3.pdf)

https://www.bloomberg.com/news/articles/2022-07-15/odds-of-us-recession-within-next-year-near-50-survey-shows#xj4y7vzkg (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/08-15-22_Bloomberg_Odds%20of%20US%20Recession%20Within%20Next%20Year%20Near%2050%20Percent_4.pdf)

https://www.barrons.com/articles/stocks-could-keep-rising-if-the-fed-shows-restraint-51660354321?mod=hp_LEAD_4 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/08-15-22_Barrons_Bye%20Bye%20Bear%20Market_5.pdf)

https://www.economist.com/graphic-detail/2022/08/05/the-best-places-to-live-in-north-america (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/08-15-22_The%20Economist_Best%20Places%20to%20Live%20in%20North%20America_6.pdf)

https://www.goodreads.com/author/quotes/880695.H_G_Wells

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