June 2022 PDS Planning Market Commentary
JPMorgan Chase CEO, Jamie Dimon, captured many headlines last week when he said “you’d better brace yourself for an upcoming hurricane.” He continued that “right now, it’s kind of sunny, things are doing fine, and everyone thinks the Fed can handle this. That hurricane is right out there, down the road, coming our way.” At this point, “nobody knows if the hurricane is a minor one or Superstorm Sandy.”
Media outlets salivated over these comments and blasted them throughout the news. But remember, the media is designed to sometimes exaggerate the narrative in order to feed off of your emotions, especially fear. To that, I was fortunate enough to listen to Jamie Dimon give an update here at the National Veterans Memorial & Museum in Columbus just 12 days prior to these headlines. He discussed how he predicted about a 33% chance of the Federal Reserve successfully navigating the soft landing by raising rates at the exact right pace to lower inflation without slowing the economy, about a 33% chance of a mild recession and about a 33% chance of a hurricane. It’s funny how the media only latched on to the more extreme prediction of the hurricane!
Now Mr. Dimon raises concerns for good reason. Inflation is near 40-year highs, the Federal Reserve is not only raising interest rates but also participating in quantitative tightening (QT), and the Russian/Ukrainian war is putting additional pressure on oil and other commodities. First Trust’s Brian Wesbury countered that, “in spite of these problems, consumer cash flow and balance sheets remain healthy. The financial obligations ratio finished 2021 at 14.0%. That’s the share of consumers’ after-tax incomes that they need to use on debt obligations (like mortgage payments and car loans) as well as recurring payments such as property taxes, homeowners’ insurance, and car lease payments. To put that in perspective, from 1980 (when the data start) to the end of 2019, the ratio was never lower than 14.7%.” He continued that “put it all together and it means some sort of hurricane may be on the radar, but it isn’t very close.”
There’s still much to be done to bring inflation down while keeping the economy pressing forward. Volatility is likely the new normal for the time being, and we remind investors to take a long-term diversified approach, and not to get caught up in the recent weekly or monthly swings in and out of favor.
| Asset Index Category |
Category |
Category |
5-Year |
10-Year |
|
3-Months |
1-Year |
Average |
Average |
|
| S&P 500 Index – Large Companies |
-5.5% |
-1.7% |
11.4% |
12.2% |
| S&P 400 Index – Mid-Size Companies |
-5.5% |
-7.8% |
7.9% |
10.5% |
| Russell 2000 Index – Small Companies |
-9.0% |
-17.8% |
6.4% |
9.4% |
| MSCI ACWI – Global (U.S. & Intl. Stocks) |
-6.0% |
-7.6% |
8.7% |
10.2% |
| MSCI EAFE Index – Developed Intl. |
-5.2% |
-10.4% |
4.2% |
7.2% |
| MSCI EM Index – Emerging Markets |
-7.3% |
-19.8% |
3.8% |
4.2% |
| Short-Term Corporate Bonds |
-2.2% |
-4.1% |
1.3% |
1.4% |
| Multi-Sector Bonds |
-5.9% |
-8.2% |
1.2% |
1.7% |
| International Government Bonds |
-11.4% |
-18.4% |
-2.3% |
-2.2% |
| Bloomberg Commodity Index |
14.9% |
41.8% |
10.8% |
0.8% |
| Dow Jones U.S. Real Estate |
-2.1% |
1.5% |
8.1% |
9.1% |
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only. Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy. It is provided with the understanding that no fiduciary relationship exists because of this report. Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice. PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice. If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives. All rights reserved.