Major US equity indices sold off hard this week, with the Dow Jones Industrial Average putting in a new low for the year. It hasn’t been just the US. Global growth fears that have roiled markets across the globe.

It was a rough week for investors, as the major indices gave back all their gains from the prior week. Why? Traders (not investors) front ran this week’s inflation data, hoping for a much softer number that would take the Fed’s foot off the rate hike pedal.

Investors are engaged in a game of tug-of-war. What are they fighting about? Fear. Inflation fears and recession fears. Each piece of economic data seems like the bell starting the next round. Employment data for August was released Friday, showing 315,000 jobs being added, down from a revised 526,000 jobs in July.

The markets took an abrupt change Friday morning after Fed Governor Jay Powell delivered his speech at the Jackson Hole, Wyoming economic symposium. Consensus coming into the meeting was that the heavy lifting on rate hikes was behind us and the old dovish tone would return from Mr. Powell. It was not to be.

The Fed wants investors to know one thing.: Inflation must come down, and rate hikes will continue until that happens, even if it leads to a softening economy. Where interest rates have had a major effect is in real estate.

Imagine you hopped into a time machine and landed in 2015. Now, imagine someone telling you that the inflation rate in August of 2022 was 8.5%! And then, someone told you the market went “up” after the news.

There are a lot of shattered crystal balls on Wall Street! The unemployment rate is back to its pre-pandemic lows of 3.5% and we have finally clawed back all those lost jobs.

This week was action-packed, with more than 170 companies reporting earnings, in addition to a slew of economic data. We can safely assume at this point those corporate earnings, while still relatively strong overall, are slowing.

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.

As the economy opened, the consumer started spending money on trips, restaurants and other experiences.  As inflation picked up and savings were drawn down, spending started to slow.

Thursday marked the end of the first half to 2022 and I, for one, will be glad to put it in the rearview mirror. It was the worst first half in 52 years.

Historically, consumer sentiment peaks with market peaks and bottoms around market bottoms. It doesn’t really lead, nor lag the market. It’s more of a coincident indicator.

School is out and those who are planning a summer vacation away from home, buckle up; it’s going to cost a lot more than last year. Inflation is running rampant.

Food increased 10.1%. Energy was up a whopping 34.6% (gasoline alone was up 48.7%). New vehicles were up 12% while used vehicles cost 16.1% more than last year. Shelter (i.e., “rents”) were only up 5%.

In California, the current average is $6.246 vs $4.20 a year ago giving us the dubious distinction of being the most expensive state, by far, to top up the tank. (1)

Last week’s “retail Armageddon” was followed by good news coming out of retailers who reported this week. Per Bloomberg.com (2), consumers are dipping into their savings to keep spending.

Walmart and Target both reported disappointing earnings this week. Consumer buying patterns changed and both retailers were caught with the wrong inventory.

n a radio interview Thursday evening, Fed Governor Jay Powell said they will not simply raise rates without concern for its effects on the economy. They are making decisions based on data that is changing quickly.

For those of you who leased a car and are coming up on the end of the lease period, you may want to review your contract. Knowing what your car is worth (even if it’s not “technically” yours) might be worth the effort.

Volatility was the name of game this week as equity markets gyrated wildly after the Federal Reserve hiked the overnight rate by 50 bps on Wednesday.

That’s right, the economy went backwards. All this talk about when the economy might tip into a recession later this year or next and we just discovered that the economy was already slowing dramatically.

So, are bonds still a good investment? Yes. They are a vital component of a well-diversified portfolio. They should return to providing a ballast to the equity portion of a portfolio.

With China back to mass lockdowns, there is already significant disruption to the Chinese economy which won’t help the global economy fight its way out of its supply-chain issues.

As for as homes are concerned, prices would need to decline to make it affordable.  In areas like San Diego, the low supply of homes coupled with low rates pushed prices higher.

Despite the increases in home prices, Residential Real Estate loans are well below the peak during the recession of 2008. Debt levels are much better. Values are much higher.

We have 6.3 million unemployed people in the US, yet there were roughly 11.3 million open positions in January.  Such an imbalance will likely continue to put upward pressure on wages.

Food and Energy costs currently take up 10% of consumers’ budgets, half as much as they did back in the ‘70s.

By: Jeff Anderson, CFA This Week: It’s that time of year again when the investment community pours over Hedge Fund’s must submit a 13-F filing

By: Jeff Anderson, CFA This Week: Volatility in the bond and equity markets continued this week. The S&P 500 clawed back over half of its