Our last market recap, dated June 15th, struck an optimistic chord: the Federal Reserve (Fed) had just raised interest rates by 0.75% and the markets reacted positively. Prior to the announcement concerns swirled that the Fed would act more aggressively and impose a higher rate increase. By sticking to 0.75% the Fed signaled they will maintain a disciplined approach.
Unfortunately, it turns out that optimism was short-lived. Markets reversed course on June 16th as fears of a recession resurfaced. Some data does reflect an economic slowdown, including new housing starts which fell by 14% (economists expected a decrease of 2.6%).1 Markets continued to seesaw for the remainder of the month.
A June 24th report showed some signs that inflation is beginning to abate. Coupled with further data of a slowing economy, the markets rejoiced. The Dow Jones Industrial Average (Dow) gained 823 points, the S&P 500 was up 116 and the NASDAQ increased 375. The markets are hopeful that future rate hikes may not be as robust based on this data. Adding to the optimism were the results from the Fed’s annual “stress test” on banks, which showed that lenders have enough capital to weather a “severe economic downturn.”2
Wrapping up returns for the second half of the month, the net result of the volatility was negligible. As of the second half of the month to June 30th, the Dow grew by 107 points (0.35%), the S&P 500 dropped by 5 points (0.12%) and the NASDAQ lost 70 points (0.63%).
1 www.cnbc.com, “Dow sinks 700 points, dropping back below 30,000 to the lowest level in more than a year”, June 16, 2022
2 www.nypost.com, “Dow jumps more than 800 points as Wall Street ends the week on a winning note”, June 4, 2022