The year 2022 continues to provide excitement to the downside. At the recording of the client update, I said all I believed needed to be said. Then the economy gave us more data.
The following is a note from our investment team:
“First off, GDP was reported to be negative quarter-over-quarter, which indicates slowing growth but not an economic contraction. On a year-over-year basis, GDP is still +3.6%. Clint has been discussing the inevitability of a growth-slowing regime on our Monthly Trend Reports since early 2021.
In mid-late 2021 we began to see signs of a pronounced and persistent growth slowdown in several leading economic indicators. We’re not surprised that the slowdown is being reflected in today’s GDP reading. As we’ve seen in recent history, slowing economic growth does not mean a contraction is imminent. Still, we are seeing signals in several proprietary indicators that we should expect growth to continue to slow for the next few quarters.”
In short, in 2020, the US Government flooded the economy with over $5 trillion, and now the bill is due. The US economy has inflation and slowing growth, which is expected after the last two years. How might this affect your investments? For months, the Bond market has been falling, “pricing in” the current rising rates. We believe these falling bond prices should end soon, but we cannot predict the future as we often say. Once Bond prices stabilize, your portfolio should look a lot better.
We expect growth stocks (similar to the NASDAQ index) to continue their fall in the stock market, so we rebalanced to value stocks earlier this year. As we believe value stocks should hold up well in a down market. Overall, this is a year we may just have to endure. Yet, there will be good times ahead.