Stocks Move Higher
In advance of Friday’s much-anticipated employment report, stocks enjoyed successive daily gains despite ongoing concerns about a recession. Recession fears were supported by an inversion in the yield curve and updated second-quarter Gross Domestic Product projections indicating the economy is ready to contract.
Technology shares were the week’s big winners as investors appear to have turned to companies with earnings growth potential during a weakening economic environment. Stocks bounced along the flatline following the strong jobs report on Friday to close out a positive week.
U.S. equities moved higher this week with the S&P 500 gaining 2.0% and the NASDAQ climbing 4.6% on the week.
In the U.S., smaller sized companies slightly outperformed the S&P though lagged the NASDAQ. The Russell 2000 index increased 2.4% on the week.
International stocks also improved though lagged domestic markets. MSCI EAFE gained 1.0%.
Emerging market stocks were nearly in line with developed international – MSCI EM index climbed 0.9%.
U.S. investment grade bonds, on the other hand, gave up some ground as the Bloomberg Barclays U.S. Aggregate Bond index declined about a percent.
LOOK-BACK - As of 6/30/2022, the total return of the S&P 500 was down 10.6% for the trailing 1-year, +10.6% per year for the last 3-years, +11.3% per year for the last 5-years and +13.0% per year for the last 10-years. The S&P 500 consists of stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research).
DOWN TEN, AND THEN WHAT? - The S&P 500 was down 10.6% (total return) for the year ending 6/30/2022, the 40th time in the last 400 months that the index has been down at least double-digits on a trailing 1-year basis. In the previous 39 times that the index was down at least 10% (total return) for the previous 12 months, the average return for the next 12 months was a gain of +4.2% (total return) (source: BTN Research).
DOWN TWENTY, AND THEN WHAT? - The S&P 500 has been down at least 20% (total return) for the trailing year at the end of 20 months in the last 400 months, most recently as of 6/30/2009. In the 20 times that the index was down at least 20% (total return) for the previous 12 months, the average return for the next 12 months was a gain of +17.1% (total return) (source: BTN Research).
Reprinted with permission from BTN. Copyright © 2022 Michael A. Higley.
 Data obtained from Bloomberg as of 7/8/2022
S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.
Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as
MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.
MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
Bloomberg Barclays US Agg Bond: The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg Barclays High Yield Corp: The Bloomberg Barclays US Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition,
Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.
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