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T.G.I. . . . H2

07/03/2022

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”.

This too shall pass . . . bring on H2!

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