Week in Review: June 24, 2022

Following its worst week since March 2020, the S&P 500 enjoyed its best week since May 2020, recovering all of the prior week’s losses. Bond markets also enjoyed positive returns as yields fell on growing concerns of recession, lowering the 10-Year Treasury yield from 3.23% to 3.14% over the course of the week.

As has been the case for some time, investors remain focused on inflation, the Federal Reserve, and increasingly, a possible recession. However, the potential path for all three remains unclear, and will take time to unfold, leaving investors in a holding pattern.

Speaking before Congress, Fed Chair Jay Powell reiterated that the Fed is focused on gaining the upper hand on inflation saying, “We really have to get inflation down to 2%.” Doing so while avoiding a recession, a so-called “soft landing”, will be difficult, with Powell noting that “Recession is certainly a possibility” and that global events in recent months will make a soft landing “harder”. As we have previously noted, with talk of recession increasing, it is important to remember that the economy is not the market, and vice versa. Thus, given the forward-looking nature of markets, it is not uncommon for them to bottom and begin to recover ahead of actual economic activity.

Putting the current bear market in context, at nearly five and a half months, it has now lasted longer than six other bear markets over the past 40 years, according to LPL Financial. In fact, only two have lasted longer, the 2000-2002 tech bubble and the 2008-2009 Great Financial Crisis.