What To Expect In The Second Half of 2022
Over the past few months, the economic landscape has continued to experience a great deal of volatility. With rising inflation and sub-par market performance, it’s natural to have questions and concerns about what you can do to mitigate the impact these factors have on your short and long-term goals. Read on to learn more about key factors we’re watching closely and how our team is positioned to help you stay aligned with your vision for the future.
The biggest factor that we’re watching - and that everyone is feeling - is inflation.
The good news is that, according to the Bureau of Labor Statistics, the consumer price index (CPI) rose 8.5% over the past year as of July. This is a considerable slowdown from 9.1% in June. While no one knows for sure when inflation will peak (or if it already has), most economists agree that inflation may continue to level off through the end of 2022.
Measures by the Federal Reserve are being put in place to help moderate inflation, including an 0.75% increase in interest rates - the largest increase in 28 years. Another hike of 50 to 75 basis points is possible by the end of Q3. And, external factors such as the war in Ukraine and ongoing supply chain issues may continue to drive prices up in the foreseeable future.
Markets respond to prolonged periods of inflation with increased volatility, which is exactly what we’re observing right now. In addition, slower economic growth and geopolitical tensions resulted in lower valuations and persistent market losses in the first half of 2022. That said, both the S&P500 and Nasdaq have staged significant recoveries since early July. It remains to be seen whether this rebound will be sustained over the coming months or if the headwinds we’ve described will prevail.
It’s also important to note that not all sectors will be impacted by inflation and other economic factors we’re experiencing. In fact, it’s expected that sectors such as consumer staples, industrials, retail stocks, and health care are likely to experience less volatility in the coming months.
In terms of what the future holds, when the Federal Reserve begins to ease its monetary policy measures, markets have historically bounced back quickly. The question remains, however, if that will happen before the end of the year and how much more pressure markets will endure in the meantime.
WHAT WE’RE DOING TO HELP
Our approach to investing and in managing your portfolio is specifically designed to support both favorable and challenging economic climates. While it’s no doubt that bear markets, like the one we’re currently experiencing, can be painful to endure, staying calm and consistent over the coming months will be critical to support long-term returns. Below are just some of the ways we’re actively working to support you and your goals now and into the future.
Through a continued focus on diversification, we seek to minimize risk and maximize returns. While this is already a foundational piece of our investment strategy and one that is built into your existing portfolio, we’re continuing to pay close attention to factors that may impact your returns and are regularly working to rebalance your portfolio, as needed and as appropriate, in response.
When the market drops, it can be tempting to sell and jump back in when values start to increase again. However, doing so could result in permanent losses as you may miss the value delivered during early stages of market recovery. Time in market often outweighs the timing of the market, which is why everything we do centers around a consistent, long-term approach.
Perspective & Patience
No matter how low or long a downturn lasts, markets have historically bounced back. In fact, if you look at historical price charts, markets often grow to higher levels than before. Maintaining perspective and staying patient are key to navigating the current economic climate successfully. Our team is always available to connect with you and talk through any questions or concerns you may have, helping you to remain calm and confident in your plans for the future.
Looking ahead, we’ll continue to monitor your investment, insurance, legal, and financial planning needs and help you navigate any necessary adjustments. In the meantime, if you have any questions or concerns as it relates to your wealth management plan or changes to your personal goals, please don’t hesitate to reach out to our team.
Seeking support, but not yet an Entrust Wealth Partners client? We’d be happy to help! Simply contact us at (860) 838-3730 to discuss how we can help you make progress towards your goals.
Content in this material is for general information only and 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. No strategy assures success or protects against loss. This material was prepared by Courtney Henry Consulting.