Thank God the first half (H1) of this year is over!
Forgetting the horror of Putin’s War on Ukraine and the never-ending clown show in Washington, inflation broke out with a vengeance, interest rates started increasing rapidly . . . and stocks stumbled into a bear market.
The Dow Jones dropped 14%, while the S&P lost 20% and the volatile NASDAQ lost almost 30%. Unless they remember 2009 when the S&P lost 52%, many investors think stocks have already “crashed.”
Of the eleven sectors in the economy, only energy was up – a whopping 32%. Tech stocks lost about 8%.
As a whole, commodities did well – up 21% but that number is skewed by the explosive increase in energy stocks. Suggesting a worldwide food crisis is approaching, agriculture stocks rose 12%.
Internationally, Europe, Japan & Asia were all down around 20%.
There was also little safety in the bond market – down almost 14%.
What does H2 hold for investors? While it is a long time until year-end, I expect inflation to peak and start subsiding before then. That will also reduce the upward pressure on interest rates. The mid-term elections should reduce some uncertainty in Washington. Hopefully, Putin’s War on Ukraine will be resolved by year-end. Either way, uncertainty will be reduced, which is a positive for stocks. Plus, the severity of the food crisis will be clear by then, further reducing uncertainty.
I think we are closer to the bottom of the cycle than the top and will not increase my level of cash. Indeed, I think it is time to “cherry-pick”.