2022 Mid-Year Update - Event Recap
/History doesn’t repeat but it often rhymes. To gain a better understanding of our current markets and put this year in perspective, it’s important to understand what’s happened in the past.
On June 30th 2022, Gilbert & Cook hosted a mid-year update event, featuring BlackRock economist, Mark Peterson. Halfway through the year and it's certainly been a remarkable historic start. Let’s take a look back at some of the unusual outcomes thus far.
Here are 5 big takeaways from the event speaker:
1) We’ve clearly seen a challenging start for both stocks and bonds so far in 2022. Stocks and bonds are both negative; which is very rare. Over the last 95 years, stocks and bonds have been negative at the same time in the same calendar year, twice – in 1931 and 1969. The culprit? The market trying to digest the economy and figure out where we’re headed from here. This year, the markets priced in a lot of short-term interest rate increases by the federal reserve in effort to slow the economy and bring inflation back to more modest levels.
2) Speaking of inflation… 2022 saw the worst start ever for bonds going back to 1926, down more than 10%. However, we’ve reset interest rates and bond returns to much healthier levels for investors going forward.
3) Looking at the stock side…through the end of June we saw the 5th worst start for stocks, out of 95 calendar years. However, history tells us that the first half of the year and the second half of the year are not correlated. In fact, in 7 out of the 9 worst starts to the calendar year, stocks have ended up much higher 12 months later.
4) A big part of the story on the stock side is the volatility. If we look at the number of days that the market moved up or down by more than 2%; as of June 30th, 2022 has seen 14 down days and 12 up days, greater than 2%. Interestingly enough, the best and worst days in market history are often around the corner from each other. For example, in March of 2020 we had 3 of the worst days in stock market history – but we also had 5 of the best days in market history in the same month. Diversification is more important than ever and it’s important to remember that when we see volatility in the market, don’t let it derail your long-term financial plans.
5) Consumer satisfaction level is often a contrarian indicator for the market. History shows that if less than a 3rd of the country is satisfied, 1 year later stocks are up better than 15% on average. The opposite is true as well; whenever there is a lot of satisfaction, expectations are high and returns are lower.
Disclosure: The presentation on June 30th 2022 was meant for informational purposes only. The featured speaker is not affiliated with Gilbert & Cook, Inc. Gilbert & Cook, Inc. does not offer tax or legal advice. You should consult with an attorney for legal advice and a qualified tax professional for tax advice. Gilbert & Cook, Inc. is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Gilbert & Cook, Inc. and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Gilbert & Cook, Inc. unless a client services agreement is in place.
Sources: Morningstar as of 6/30/22. U.S. bonds represented by the IA SBBI US Gov IT Index from 1/1/26 to 1/3/89 and the Bloomberg U.S. Agg Bond TR Index from 1/3/89 to 6/30/22. U.S. stocks are represented by the S&P 500 Index from 3/4/57 to 6/30/22 and the IA SBBI U.S. Lrg Stock Tr USD Index from 1/1/26 to 3/4/57, unmanaged indexes that are generally considered representative of the U.S. stock market during each given time period. Past performance does not guarantee or indicate future results. Index performance is for illustrative purposes only. You cannot invest directly in the index
