Market Update - July 2022

Market Update - July 2022

July 01, 2022

Markets don't like uncertainty, but they are getting a healthy dose this year. The first half of 2022 has been challenging worldwide for equity and bond markets.

This year's main headline has been how to combat rising inflation, which stems from multiple factors, including persistent supply chain issues emanating from China's zeroCovid policy, lack of energy infrastructure, elevated rental rates, and various geopolitical issues.

The Federal Reserve has pulled two levers to overcome inflation - raising rates and stopping quantitative easing. These maneuvers tend to increase borrowing rates and, in theory, slow demand/economy, helping reduce inflation. From these tactics and others, we are seeing some signs of inflation easing, such as energy and agriculture commodities have decreased substantially in the last few weeks.

As we try to orient ourselves to what may lie ahead for the remainder of 2022, it can be hard to know which direction inflation, interest rates, and geopolitical risks will go. Especially when we feel buffeted by forces that are either unusual or that we haven't experienced in some time.

Turning to fundamentals that have provided the foundation of positive returns for stocks and bonds over the long run can be helpful when markets are shaky. Given the current landscape, we have moved to a more defensive position in our stock exposure and are tilting towards US Large Value. We have also reinforced our bonds to have less interest rate risk and increased the credit quality. Additionally, we have decided to avoid developed international such as Europe. As Europe may underperform the United States due to their energy situation caused by the Russia/Ukraine war.

During this challenging time, we cannot predict, but we can plan. Please do not hesitate to contact our office if you have questions or would like to check-in. We are happy to walk you through our approach and explain what we are doing to keep you on track to meet your financial goals and needs.

We look forward to hearing from you and hope you have a wonderful week.

Sincerely,

Charles D. Dodds, Jr., CFP®, CLU®, ChFC®, CIMA®
President, Sr. Portfolio Manager

Adrian F. Dodds, CFP®
Managing Partner, Sr. Financial Advisor