Market Review - July 2022
Source: Zephyr Style Advisor
July was a strong month for equities, after a rough first half in 2022. Despite ongoing concerns of economic growth and inflation, the US (9.2%) had its best month since November 2020¹, outperforming both international developed equities (5.0%) and emerging markets (-0.2%) in July. The US rally can be attributed to corporate earnings, as 73% of S&P 500 companies reported actual earnings above estimates in July offsetting weak economic data². Emerging markets remained relatively flat during the month as China (-9.4%) continued to struggle with COVID-19 outbreaks.
Within the S&P 500, all eleven sectors were positive for the month. Consumer discretionary and technology led the gains, returning 18.9% and 13.5% in July, while defensive sectors like Healthcare and Consumer Staples were the weakest, returning 3.3% each. Energy (9.7%) had another strong month and is now up 44.7% for the year. Looking across size and style, large growth led large value again in July. Companies like Apple and Tesla, which both rallied over the month, are considered large growth companies (and part of the technology and consumer discretionary sectors) which helps explain outperformance across size, style, and sector.
Bonds reversed course during the month and saw gains across all major markets. The Fed (Federal Reserve) increased rates by 0.75% for the second consecutive time as inflation remained stubbornly high. Despite the interest rate hike, the overall bond market rally can be attributed to fears of a Fed induced recession causing potentially smaller and fewer rate hikes going forward. US fixed income was up 2.4% during the month, followed by emerging markets (2.1%) and international developed (1.9%). Across US bond sectors, corporate high yield (5.9%) was the top performer in July and had its best month since 2009³. TIPS (4.4%) and corporate investment grade bonds (3.2%) were also up in July. After 18 consecutive weeks of outflows, investment grade bonds saw its first week of positive inflows during the month⁴, which helped boost returns.
The broad commodity index was up 4.3% in July. Energy was once again the top contributor to the index up 12.4% during the month. Gold continued to struggle in July and fell by 2.3%. US REITs were up 8.5% in July and has its best month since December 2020⁵. All major sectors within real estate were up during the month, as quarterly earnings reports for REITs have so far been strong. The US dollar, which is considered a safe haven, gained 1.2% amid recession fears and is now up 10.4% year to date.
Relative to a globally balanced (60/40) equity/bond index, allocations to global equities and US REITs helped while global bonds, commodities, and gold hurt.
Source: Zephyr Style Advisor
[1] S&P Dow Jones Indices - U.S. Equities Market Attributes July 2022
[2] FactSet - S&P Earnings Season Update: July 29, 2022
[3] Nuveen - Treasury yields fall as markets await a Fed pause
[4] Nuveen - Treasury yields fall as markets await a Fed pause
[5] Wealth Management - After a Rough First Half, Publicly-Traded REITs Bounced Back in July
Check the background of your financial professional on FINRA's BrokerCheck.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
This communication is strictly intended for individuals residing in the states of AL, CA, FL, IN, MT, NC, OH, TX, WA, WV. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services. Securities and Advisory Services Offered Through Commonwealth Financial Network (Privacy Policy), Member FINRA/SIPC and a Registered Investment Advisor, Fixed Insurance Products and Services Offered Through CES Insurance Agency.
IMPORTANT INFORMATION
This report is for informational purposes only, and is not a solicitation, and should not be considered as investment or tax advice. The information has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change.
Investing involves risk, including the possible loss of principal. Pas performance does not guarantee future results. Asset allocation alone cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against a loss. Actual client results will vary based on investment selection, timing, and market conditions. It is not possible to invest directly in an index.
Information presented here has been developed by an independent third party, AssetMark, Inc.
AssetMark, Inc. is an investment adviser registered with the Securities and Exchange Commission. (C)2022 AssetMark, Inc. All rights reserved.