Market Notes - July 7, 2022

The first half of 2022 has ended and it has been reported that the S&P 500 experienced the worst performance (-20.58%), over the first 6-months of the year, since 1970 (-21.01%). I checked my historical database and in the second quarter of 1970, the S&P 500 experienced three down months of: -8.75%, -5.78%, and -4.86 percent; as the equity markets reacted to the escalation of the Vietnam War, intensified civil unrest here at home, and the inflation rate trending higher (to the highest rate since the Korean War [1950-1953]). The good news, with regard to the equity markets, was the bounce back rally that proceeded over the following 6-months. The performance on the S&P 500 for the remainder of 1970 was a positive 29 percent.

So where are we now?

Heightened volatility has been with us thus far for the entirety of 2022. During the last week of May (2022), the S&P 500 experienced a positive return of 6.62 percent. That move was enough bring the S&P 500 return for the month of May to the slightest of positive performance at 0.01%. In comparison, the return for the month of April (2022) was -8.72 percent. The first three weeks of June (2022) experienced negative returns of: -1.15%, -5.04%, and -5.75% for the S&P 500. The trading week ending June 24^th had a positive return for the week of 6.46%, with Friday, June 24^th providing a very positive day with encouraging technical readings. Disappointingly, the next week did not provide a follow through to the upside as the week finished with a negative return of -2.18 percent. End of the quarter activities of institutions may be responsible for some of the selling that week.

Thus far, since the end of the second quarter (2022) we have seen signs that the selling pressure has diminished. As of this writing, the S&P 500 is up over 100 points from the June 30, 2022 close of 3785.38, approximately 3% higher. With the extremes in selling that we have experienced in recent weeks the conditions are seemingly suitable for a potential rally attempt. Whether any rally attempt becomes a sustainable, and by how much are the unknowns. I can only observe that after extreme periods of selling, probability favors a counter direction move of some significance. While history does not repeat itself, it has been said that it often rhymes. We cannot say with any certainty whether a bounce back rally will begin over the coming weeks/months, but eventually it will come, we can only look for positive signs and factors from which we can make decisions.

Chuck & Mike Ballou

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Indices are not available for direct investment.
Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Past performance may not be indicative of future results.
Any opinions are those of Chuck and Mike Ballou and not necessarily those of Raymond James.
There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.