Key Highlights
- The S&P 500® was up 9.11% in July, bringing its YTD return to -13.34%.
- The Dow Jones Industrial Average® gained 6.73% for the month and was down 9.61% YTD.
- The S&P MidCap 400® rose 10.75% for the month, bringing its YTD return to -11.59%.
- The S&P SmallCap 600® was up 9.93% in July and had a YTD return of -11.54%.
Market Snapshot
Earnings pushed back the bear in July, with the S&P 500 ending the month up 9.11%, its best month since November 2020’s 10.75% gain. Ironically, concern over earnings was what pushed stocks down in June (-8.39%) to kill the bull and secure the bear’s place. Specifically, while earnings for Q2 2022 were expected to increase 13% over Q1, the whisper numbers were much lower, as was the concern over the second-half guidance. However, actual earnings (72.1% reported) did not make the expected 13% gain and now indicate a 7% gain, which is a headline disappointment for some, but not if you were one of those money managers (or traders) who traded into the whisper numbers (and sold). For them, it was an unexpected beat and a time to reallocate, as consumer spending continued (with Q2 sales potentially setting a new record and margins increasing). Similarly, guidance indicated expectations for a weakened Q3 (via inflation, higher interest rates and a strong U.S. dollar) and the word “recession” is now in the eyes of the dictionary after Q2 2022 GDP posted -0.9% and Q1 posted -1.6%. Q4’s guidance (to date) is more general and filled with concerns, but with a tone of “we can get through it” (almost as if it was written by the sell side), as hopes for a 2023 recovery (now including an FOMC interest rate increase) came back to create optimism (and buys). Adding to that new optimism was a new dovish U.S. Fed and Chair Powell (tough now, easy later), even as the Fed stuck to its script, increasing another 0.75% this month. It scripted another increase in September, but teased about the rate, turning to the time-tested phrase “data dependent” for the actual amount. To the Street, the read was a Fed that would (most likely) raise another 0.75% at its Sept. 20-21 meeting, but then pull back with lower increases (at the Nov. 1-2 and Dec. 13-14 meetings), with some speculation (hope is eternal) of a 2023 mid-year reduction.
