Looking Back at a Rocky First Half of 2022

Financial markets remained unsettled and volatile during the second quarter. The stock market’s trend changed multiple times as investors continued to search for direction amid a sea of changing conditions. The S&P 500 finished the second quarter with its worst three-month period since the first quarter of 2020 and worst first half of a calendar year since 1970. This quarter’s letter recaps the first half of 2022 and discusses the top investment themes heading into the second half of 2022.

2nd Quarter Sees a Mixture of Old & New Themes

Investors navigated a combination of old and new investment themes during the second quarter. Inflation pressures remained top of mind as the headline CPI accelerated at a more than +8% year-over-year pace during both April and May. In response to persistent inflation, the Federal Reserve continued to tighten monetary policy by raising interest rates at each of the April, May, and June meetings. Like the first quarter, stocks traded lower as the interest rate increases caused investors to dial back their risk taking.

Multiple new themes also emerged during the second quarter. Several retailers, including Walmart and Target, reported substantial inventory buildups as inflation pressured consumer spending on discretionary items. The retailers warned their profit margins could decline in the coming quarters as they may need to mark down items to clear the excess inventories. From a monetary policy perspective, the Fed supplemented its interest rate increases by starting to shrink its balance sheet. The Fed is opting not to reinvest the proceeds of up to $30 billion of maturing Treasury securities and up to $17.5 billion of maturing mortgage-backed securities per month. The decision is another way for the Fed to decrease the amount of money supply and liquidity.

Federal Reserve Gets Aggressive at June Meeting

The Federal Reserve adopted a more aggressive tightening stance at its mid-June meeting. The central bank raised the federal funds rate +0.75% and unveiled a ‘strong commitment’ to bring inflation back down to 2%. For historical context, June was the first +0.75% increase since 1994. The Fed’s latest moves are another indication of how 40-year high inflation readings are driving the Fed’s monetary policy decisions.

How does the current cycle compare to prior cycles? Figure 1 compares the current cycle’s federal funds rate path against the last five cycles. Factoring in the +0.75% increase at the June meeting, the Fed has raised interest rates +1.50% since the first increase in March. Investors expect the Fed to maintain its +0.75% pace at the late-July meeting, which would make 2022 the fastest +2.25% increase compared to the last five cycles. Market consensus calls for the Fed to keep raising interest rates at its meetings later this year, although the number and size of the increases remain open questions.

The June meeting represents a potential turning point. Why? Throughout the first half of 2022, investors were concerned the Fed was not being aggressive enough to combat persistent inflation pressures. The thinking was inflation could become entrenched if the Fed raised rates too slow, which could force the Fed to raise interest rates for a longer period and to a higher endpoint. The June meeting marks a clear change in the Fed’s thinking and indicates the central bank will front-load interest rate hikes if necessary to ease inflation pressures.

Investors initially reacted positively to the Fed’s updated guidance. The S&P 500 was down -19.1% from the start of the second quarter through the Fed’s meeting on June 16th. From June 16th through June 24th, the S&P 500 gained almost 6.7%, and Treasury yields declined. Why does this matter? The equity rally and declining Treasury yields suggest investors became slightly more confident the Fed’s aggressive tightening upfront could get inflation under control sooner. The quicker inflation is under control, the sooner the Fed may be able to slow its interest rate hikes and evaluate policy more rationally.

To be fair, there is a potential downside to the Fed’s new tightening approach, and the market appears to be focused on the risk as the second quarter ends. There isn’t a clear understanding of how fast or how much the Fed’s actions will impact the economy. There is a risk the impact from the Fed’s actions is delayed and the Fed keeps raising interest rates, potentially overtightening and slowing economic activity more than expected over the next 12-18 months. It’s a delicate balancing act for the Fed to pull off.

Economic Data Continues to Point to Softer Growth

The latest economic data indicates investors are justified in worrying about the Fed overtightening and tipping the U.S. economy into a recession. The stacked charts in Figure 2 track a range of economic indicators across housing, consumer confidence, the labor market, and consumer spending. The data remains strong relative to historical standards, but it does indicate the U.S. economy is starting to soften.

The top chart tracks the annualized pace of housing starts and building permits. Housing demand soared during the pandemic, but both starts and permits have declined more than -10% on an annualized basis since the end of 2021. The housing market slowdown coincides with a more than +2.50% increase in the 30-year fixed mortgage rate since the end of 2021, suggesting rising mortgage rates are already pressuring housing demand.

The second chart tracks month-over-month retail sales growth across multiple categories during May. It shows consumers spent more at gas stations and grocery stores as gasoline and food prices rose and less on discretionary-related goods, such as autos and auto parts, electronics and appliances, and home furnishings. The data offers a near-term look at how high inflation is impacting and shifting consumer spending.

The third chart tracks the University of Michigan’s Consumer Sentiment Index. The index made a new record low of 50 during June as consumer sentiment continued to deteriorate. Weaker consumer confidence coincides with high inflation and points to a worried U.S. consumer, which is concerning because the consumer accounts for nearly 70% of U.S. economic activity.

Source: MarketDesk, National Association of Realtors, U.S. Census Bureau, University of Michigan, Department of Labor.

The fourth chart tracks weekly initial jobless claims. While initial jobless claims remain low by historical standard, the trend has reversed from 2021’s steady decline as jobless claims drift higher during 2022. Separate data from the Bureau of Labor Statistics shows the U.S. continues to add new jobs each month, but the pace of those job gains has slowed significantly compared to 2021. The +390,000 jobs added during May 2022 were the slowest pace since April 2021. The two measures indicate labor demand is softening, a notable change from the last 12 months when businesses struggled to fill open jobs.

Equity Market Recap – Another Difficult Quarter

The second quarter was another difficult environment for equities. The S&P 500 Index lost -16.1%, only slightly outperforming the Russell 2000 Index’s -17.3% return. It was an especially difficult quarter for Growth stocks as rising interest rates continued to pressure valuations. The Russell 1000 Growth Index traded down -21.1% and underperformed the Russell 1000 Value Index’s -12.3% return. The Nasdaq 100 Index, which investors view as a concentrated Growth index due to its Tech overweight, traded down -22.5% during the second quarter.

U.S. sector returns offer another look at second quarter performance trends. Energy and defensive sectors, including Consumer Staples, Utilities, and Health Care, outperformed as investors rotated to commodities and risk off assets. Growth-style sectors, which include Consumer Discretionary, Communication Services, and Technology, underperformed the broad market as rising interest rates pressured Growth stocks. In the middle, cyclical sectors, including Materials, Industrials, and Financials, performed in line with the S&P 500.

International markets’ lower exposure to expensive Growth stocks allowed them to outperform U.S. markets during the second quarter. The MSCI EAFE Index of developed market stocks returned -13.1% during the quarter, while the MSCI EM Index of emerging market stocks returned -10.4%. Despite international stocks’ outperformance during the second quarter, questions remain about the impact of rising energy prices in Europe and tighter financial conditions in emerging markets (i.e., higher interest rates & lower liquidity).

Bond Market Recap – Rising Treasury Yields Lead to Additional Losses

Bonds traded lower during the second quarter as Treasury yields continued to rise in anticipation of tighter Fed policy. Corporate investment grade bonds produced a -8.4% total return, slightly outperforming the -9.4% total return generated by corporate high yield bonds. While investment grade bonds outperformed in aggregate during the second quarter, the group’s outperformance versus high yield bonds primarily occurred during the second half of June after the Fed’s new aggressive tightening stance caused investors to grow concerned about slower economic activity.

Figure 3 tracks the interest rate spread between corporate high yield bonds and Treasury bonds. The spread is a measure of credit risk, more specifically how much more yield investors demand in order to loan to riskier companies. The chart shows the spread widened significantly from 3.40% at the start of the second quarter to 5.26% on June 28th. The wider spread indicates investors are concerned about borrowers’ ability to make principal and interest payments as financial conditions tighten. Looking back at the past five years, the 5.26% spread is near levels last seen during late 2020, the months following the Covid outbreak, and late 2018, the last time the Fed raised interest rates.

Second Half 2022 Outlook – Unanswered Questions

The outlook is indecisive as financial markets close out a volatile first half of the year. Some investors believe the Fed’s actions will dramatically slow economic growth and push the U.S. economy into a recession. On the opposite end of the spectrum, some investors believe the U.S. economy is strong enough to withstand the Fed’s actions and view the stock market as oversold.
The back and forth is likely to continue until some of the market’s most pressing questions are answered. Key questions include the direction of Federal Reserve policy, inflation’s stickiness, the trajectory of corporate earnings growth and forward earnings estimates, and the path of economic growth. Our team will be monitoring the answers to these questions in coming months to help guide investment portfolio positioning.

The current investing environment requires a long-term outlook. Trend changes are frequent, fast, and driven by fluctuating market headlines, and keeping up with the day-to-day whims of the market can be emotionally taxing. Developing a financial plan and sticking to it are important steps to achieving your financial goals.

Important Notices & Disclaimer

The information and opinions expressed herein are solely those of PFG Private Wealth Management, LLC (PFG), are provided for informational purposes only and are not intended as recommendations to buy or sell a security, nor as an offer to buy or sell a security. Recipients of the information provided herein should consult with their financial advisor before purchasing or selling a security.

The information and opinions provided herein are provided as general market commentary only, and do not consider the specific investment objectives, financial situation or particular needs of any one client. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor.

The comments may not be relied upon as recommendations, investment advice or an indication of trading intent. PFG is not soliciting any action based on this document. Investors should consult with their financial adviser before making any investment decisions. There is no guarantee that any future event discussed herein will come to pass. The data used in this publication may have been obtained from a variety of sources including U.S. Federal Reserve, FactSet, Bloomberg, Bank of America Merrill Lynch, iShares, Vanguard and State Street, which we believe to be reliable, but PFG cannot be held responsible for the accuracy of data used herein. Any use of graphs, text or other material from this report by the recipient must acknowledge MarketDesk Research as the source. Past performance does not guarantee or indicate future results. Investing involves risk, including the possible loss of principal and fluctuation of value. PFG disclaims responsibility for updating information. In addition, PFG disclaims responsibility for third-party content, including information accessed through hyperlinks.

No mention of a particular security, index, derivative or other instrument in the report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security, index, or derivative. The report is strictly an information publication and has been prepared without regard to the particular investments and circumstances of the recipient.


PFG Private Wealth Management, LLC is a registered investment advisor.

What You Need to Know About the Stock Market During A Presidential Election Year

Presidential election years bring a lot of uncertainty and stress. And that’s not just for the candidates who are running.

In fact, during the 2016 election cycle, one study found that at least 50% of Americans were more stressed out because of the election. And this was true across all party lines.1

So, why does that matter?

Because stressing about election uncertainty can affect your mindset and trigger emotional investing decisions.2

The good news is that you can avoid the frenzy around the upcoming election—and the stress and poor financial choices that may come with it—if you know the facts about the markets during presidential election years. Knowing these facts can help you keep a level head no matter what the outcome of the next election is.

7 Facts About Markets In A Presidential Election Year

Don’t Let the Election Frenzy Derail a Good Investment Strategy

It’s no secret that presidential election years are uncertain times—and that investors and the stock market like certainty.

It’s also no secret that the stock market is influenced by several factors—and that a presidential election may not even be the most significant one.3

Of course, it can be easy to get caught up in campaigns, politics, and elections. And they do matter. Just not as much as you may think when it comes to investing.

Unfortunately, too many people let ideas about who could win office—and what they’ll do when they get there—run wild. And that can mean more stress and anxiety that overshadow sound investment choices and strategies.

In the end, stressing about the “what ifs” of the election just isn’t productive. As portfolio managers, we have seen how elections can fuel investors’ stress and lead them astray when it comes to their financial choices and their long-term goals. We also know how helpful it can be to have a sounding board when emotions run high. That’s why we’re here.

So, while the excitement of the election can be great inspiration to vote, don’t let it drive your investment choices. And, remember, whatever happens on November 3, 2020, life will go on. Instead of stressing about the “what ifs,” give us a call. We are here to support you, and we can help you create a personal financial strategy for the election year and beyond.

1 – https://www.apa.org/news/press/releases/stress/2016/presidential-election.pdf
2 – https://www.npr.org/sections/thetwo-way/2016/10/15/498033747/survey-says-americans-are-getting-stressed-by-the-elections
3 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
4 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
5 – https://insight.factset.com/third-year-after-presidential-election-charm-for-sp-500
6 – https://www.usatoday.com/story/money/2019/11/05/election-2020-how-does-stock-market-perform-election-year/4165271002/
7 – https://www.kiplinger.com/article/investing/T043-C008-S003-how-presidential-elections-affect-the-stock-market.html
8 – https://www.capitalgroup.com/individual/planning/investing-fundamentals/presidential-election.html

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents. 

Market Volatility in Perspective

Financial markets have been roiled recently amid fears over the impact of the fast-spreading coronavirus. These near-term disruptions to economic activity are the result of efforts to contain it. We see a downshift in 2020 global growth, with uncertainty around the size and pace of slowdown. While there are always unplanned risks, we do expect a rebound in activity once the disruptions dissipate and don’t see it derailing the U.S. expansion at this time.

What are key takeaways for investors? First, we encourage investors to keep things in historical perspective. Second, know the importance of staying invested and avoid reacting in ways that could derail long-term financial goals. 

Keep things in perspective

To provide historical context, the table below illustrates how the stock market responded during other past growth scares and bear markets. It also shows the period of positive market performance in the 12 months that followed these crises.

Stay invested

The chart below shows how a hypothetical $100,000 investment in stocks would have been affected by missing the market’s top-performing days over the 20-year period from January 1, 2000 to December 31, 2019. An individual who remained invested for the entire period would have accumulated $324,019, while an investor who missed ten of the top-performing days during that period would have accumulated $161,706.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
©2020 BlackRock, Inc. All Rights Reserved. BLACKROCK is a registered trademark of BlackRock, Inc. or its subsidiaries in the United States and elsewhere.
All other trademarks are those of their respective owners.
Prepared by BlackRock Investments, LLC, member FINRA. This material is provided for educational purposes only. BlackRock is not affiliated with any third party distributing this material.

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Navigating A Market Correction

Corrections are anxiety-provoking.

They make us wonder if we got it wrong. If we’re going to be ok.

If this time is “different.”

After all, the S&P 500 plunged “at unprecedented speed,” and this was the “worst point drop in history.”1

Should we give in and get out? Sit on the sidelines until it all blows over?


Market corrections are completely, boringly normal.

Whether it’s an epidemic, geopolitical saber-rattling, natural disaster, or a financial event, corrections happen regularly. They’re a natural part of the market cycle.

Here’s the historical take: Markets experienced 26 corrections between 1946 and 2018. On average, markets declined 13.7% and took four months to recover.2

To a long-term investor, a correction is a speed bump.

We can’t predict how long or how deep this correction will be, but we’ve been here before.

And markets have recovered.

Corrections are not something to panic about. Even when panicky headlines are everywhere. The 24-hour media cycle is all about stoking fears to draw eyeballs and shares.

The biggest mistake a long-term investor can make right now is to give in to the fear and make a big change in response to the selloff.

Emotional reactions to markets — whether it’s euphoria during a rally or anxiety during a correction — are deadly to long-term success as an investor.

It’s easy to answer a risk tolerance questionnaire and commit to a strategy when the market’s up.

It’s much harder to stick to the strategy when your portfolio drops. When it’s gut check time.

But you can’t reap the rewards of long-term investing if you don’t take the bad days along with the good.

We created your strategies to withstand turbulent markets. To pursue your long-term goals in all market environments.

We’re watching markets closely and will communicate with you if calculated changes to your portfolio are necessary.

Right now, we’d like you to do 3 things:

  1. Take a deep breath and remember that you’ve got a team of professionals behind the wheel.
  2. Trust the process. Remember the conversations we had about your goals and the reasons behind the choices we made together.
  3. If you’re experiencing anxiety, turn off the news, stay off social media, and go do something fun.

If you need a pep talk or to discuss your investment strategy, please reach out to your advisor. We’re here for you and happy to talk.

PFG Private Wealth Management, LLC



Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only. The S&P 500 is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are not available for direct investment. The performance of the index excludes any taxes, fees and expenses. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.  Insurance products and services are offered and sold through Perry Financial Group and individually licensed and appointed insurance agents.

Year-End Donations & Giving

A list of things to consider as you think about year-end charitable donations

With its blinking lights, family traditions, and festive music, December is the most wonderful time of the year. And according to Charity Navigator, the month of December really is wonderful because December sees approximately 30% of all annual charitable giving occur.

Unfortunately, despite the greatest of intentions, many will inevitably make mistakes in how they give, especially if they wait until the last minute. So, here is a list of things for you to think about as you consider your year-end charitable donations.

Make a Plan
Last year, donations from America’s individuals, estates, foundations and corporations reached approximately $410 billion, according to Giving USA in their Annual Report on Philanthropy. Hoping that 2020 is similar, that means you and your neighbors will donate over $120+ billion dollars in December alone!

How much of this was more impulse-giving vs. a well-thought-out charity plan?

Ideally, at the beginning of every year – with your financial advisor – you would map out a plan to maximize the tax benefits of your giving. Really think through what is important to you and what you want to support. Is it an organization that supports literacy? Or provides food? Or shelter for families? Creating a plan will help you be less reactive and feel less boxed in when friends ask for your charitable support.

Research Your Charity
It’s easy to get fooled by a charity’s name so you need to do your homework. And beware of scam artists pretending to represent an organization that doesn’t exist. Read a charity’s financial statements to see how they spend their (your) money. Even better, volunteer before you write a check.

Donating Stock
If you have owned stock for more than a year and it has appreciated, then don’t sell it first and then give the cash to charity. Those appreciated assets can be donated directly to charity without you or the charity incurring capital gains taxes (consult your tax professional to be sure).

Selling Your Personal Info
Quite a few charities will rent or sell the addresses, phone numbers, email addresses and detailed social media profiles of their donors, which means you might start getting a bunch of unwanted calls, emails and friend requests. Make sure you review a charity’s privacy policy before you give them your information. And many times, you have to actively “Opt Out” to ensure your personal information is not used.

Ask for A Receipt
Remember, for charitable contributions of $250 or more, you need a donor’s acknowledgement letter. And generally it’s a good idea to obtain receipts, especially when donating goods.

Don’t Delay
Shockingly, a whopping 12% of all giving occurs in the last 3 days of the year! But if you mail a check postmarked after December 31st, then you might run into trouble. Make it easy on yourself and don’t wait until the last minute.

Money Can’t Buy Happiness, But Maybe Donating to Charity Can?
Consider research from Elizabeth Dunn of the University of British Columbia, Lara Aknin at Simon Fraser University and Michael Norton at Harvard Business School. Essentially what they found in their study is the following:

  • Spending money on other people has a more positive impact on happiness than spending money on oneself
  • Spending more of one’s income on others predicted greater happiness

Discuss with Your Financial Advisor
If you have any questions or need help mapping out your Charitable Plan, set an appointment to discuss with your financial advisor.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.