By: Jeff Anderson
|Close||Weekly return||YTD return|
|US Treasury 10yr Yield||2.923%||-16.1%||140.9%|
Source: Wall St. Journal
The S&P 500 closed up nearly 2% today, clawing back a decent chunk of this week’s losses. Considering the surprise inflation data for June which crossed 9% (9.06% to be exact), this is rather good.
The second quarter earnings season is underway, and JP Morgan Chase put a damper on sentiment with its CEO and Chairman, Jamie Dimon warning of potential problems on the horizon. The bank increased its reserves for potential loan losses. Mr. Dimon is one of the Wall St executives that garners a lot of media attention, so anything he says tends to reverberate through the markets and sparks numerous debates amongst the “crystal-ball” economists and strategists. Nothing that has been said this week is new. We all know what the issues are. But the narrative seems to be shifting away from inflation fears towards recession fears, even though the two are linked. High prices for food and gasoline alone are taking even more of a cut from people’s wallets. This we know. However, as you can see from the chart that shows median checking account balances, the US consumer is in decent shape. Retail sales for June came in higher than estimates.
The Wall Street Journal
If we take stock of things today, we can be reasonably confident that:
- The average US consumer hates spending more but they continue to do so (is that negative or positive?)
- Regardless of the reasons, inflation is too high, and the Fed is committed to bring it down.
- Great companies are considerably cheaper than they have been in years, and their business models will survive, regardless of how long it takes to bring inflation down.
- The stock and bond markets, over the short term, are more driven by human behavior than the underlying fundamentals of the companies that make up those markets.
- Inflation for June surprised many but apparently the market had already baked it in. The indexes are actually higher after that announcement. The market is a better truth teller than anyone who slaps on a mic and goes on TV to pontificate about the future.
A couple of charts to finish the weekly update. One is the # of Google searches for the word “recession” and the other is what consumers think about buying cars, homes, and other goods. They really do provide a nice visual to our collective state of mind.
Advisory services are offered through Presidio Capital Management LLC, Registered Investment Advisers. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Presidio Capital Management, LLC unless a client service agreement is in place.