Though there was growing speculation that the United States would enter a recession as July closed, the stock market continued its upward trend. Despite dismal economic data, investors drove the S&P 500 index 9.1 points higher in July. This figure has now become the highest in terms of monthly performance in the last two years.
The National Bureau of Economic Research (NBER) determines when a recession officially begins, which could take many months, says Roger Scott.
U.S. businesses are in better shape than projected by Wall Street. In addition, major stock buybacks by companies have resumed.
Although it’s not uncommon for the third year of an economic recovery to be marked by tightening financial conditions, positive news from corporate America’s earnings results may dominate for most of the year. As a result, investors shouldn’t be scared away from profiting from market declines by the bears.
Still, they shouldn’t waste time chasing profits during periods of extreme bullishness. While the market return in 2022 may be acceptable, it likely won’t be as high as it has been in recent years, says Roger Scott and WealthPress.
Where You Can Invest
U.S. Value Stocks
There are two primary reasons why WealthPress is so set on maintaining its value bias in the United States. For one, value stocks have a history of being inexpensive during economic downturns. They usually return to normal trading levels after recessions end.
That’s because they haven’t gotten to that point yet. The second reason is that we anticipate inflation-sensitive equities, located in the value bucket, to outperform for an extended period if our forecast of a permanent period of rising inflation is correct.
“Given the severity of our recent low-performance relative to the market as a whole, we are more optimistic about growth than we were before,” says Roger Scott. The rush into technology companies after the COVID-19 lows evoked memories of the NASDAQ boom of 2000.
We predicted that things would get ugly after the bubble popped, and thus far, our predictions have been accurate. Today’s climate is different from what it was in 2000 because the larger, more established technology companies’ equities never traded at the same frenetic level.
Many large-cap growth firms are presently trading at relatively cheap values due to recent underperformance despite numerous good earnings announcements.
Investors in stocks and bonds should brace themselves for a turbulent ride for the rest of the year, regardless of whether or not a recession grows.
Both fixed income and equities will inevitably face increased volatility as the Fed maintains its aggressive approach to containing inflation, and markets eagerly consume every economic report.
The stock market’s volatility can be understood as a measure of the size and frequency of price fluctuations.