Thought Leadership Resource Center
This has been a difficult year for stocks, and it may not get much easier in the near term. September is historically a tough month for equities. Since 1950, the S&P 500 Index has averaged a 0.54% decline in September, the worst of all 12 months.
Read MoreThe current market environment is about as challenging as any we can recall in the past 40 years. A global pandemic, war in Europe, emboldened geopolitical adversaries, potential food and energy shortages, unprecedented monetary policy decisions, political divisiveness, and runaway inflation give all investors plenty to worry about. The question on everyone’s mind is what happens next.
Our goal in this mid-year strategy update is to connect the dots and offer a logical interpretation of current economic and market data. The insights presented in this report will build upon our monthly commentary (The Private Client Letters) and our Spring Symposium presentations. This report is a vital component of a continuous dialog with clients and our unwavering goal to “achieve clarity in a complex world.”
We could never have imagined 16 years ago when we adopted this tagline how complex the world would become. That said, we have always known that achieving clarity would be the greatest responsibility we would have for our clients.
The S&P 500 suffered its worst half since 1970 after inflation and recession concerns sparked a 21% sell-off. This year’s first half performance was strikingly similar to that of 1970 (also down -21%) and in both periods, high inflation was the issue. It is interesting to note that the second half of 1970 saw the S&P up 27%. Of course, that does not mean that's how it will go for the back half of 2022; however, we believe it is likely the market will move higher if inflationary pressures subside.
Read MoreThe Federal Reserve has announced an interest rate hike of 0.75% to the fed funds rate following their June meeting. This decision was in response to persistently high inflation data and was widely expected. The Fed is now predicting at least three more 50 basis point increases and one 25 basis point increase by year's end, which would put the Fed Funds rate at 3.40%. They also see rates at 3.8% by the end of 2023. And oddly, they suggested they may cut rates by 25 basis points in 2024.
Read MoreThe global capital markets have been besieged this year by an unusual and disturbing mix of headlines. Over these same months key economic measures have demonstrated resiliency, even as consumer confidence has collapsed.
Read MoreJust when we think things can’t get any worse in this market, another wave of selling rushes in and prices go lower. Making matters worse, every attempt for a rally in the broad indexes has been quickly turned back as stocks grind lower. With four months of 2022 now in the rearview mirror, a lot of damage has been done in equities with declines of about 10% for the Dow Jones Industrial Average (DJIA), 13% for the S&P 500, and 23% for the NASDAQ.
Read MoreThe capital markets have been operating in a nervous phase of uncertainty and volatility from the beginning of the year. Investors have been unable to gain any meaningful traction as nearly every traditional asset class has been under pressure.
We are seeing a large-scale conflict between favorable economic data and decent corporate earnings, with a decades-high rate of inflation and the appalling war in Ukraine. Economic fundamentals and growing corporate profits would normally be net positives for the markets. However, high inflation is quickly driving tighter monetary policy and higher interest rates. This, along with ongoing geopolitical distress, are net negatives for the markets.
Read MoreWith geopolitical tensions and the war in Europe dominating our headlines, the two-year anniversary of the S&P 500’s pre-COVID market peak went largely unnoticed. Just over a month after the peak, the S&P 500 had plummeted by more than 30% before beginning an epic rally of 114%. While it is now hard to imagine a world without COVID, it easy to see that COVID has forever changed many aspects of our lives.
Read MoreAfter a strong 2021, stock market volatility returned in dramatic fashion in January. The S&P 500 has had an intraday trading range of at least 2.25% in January’s final week (Bespoke). The average stock is down a little more than 9% so far in 2022, but stocks with the highest valuations are down closer to 20%.
Read MoreAs the year comes to an end, Clearwater Capital’s CEO and Chief Investment Strategist, John Chapman, offers an extended point of view on the U.S. economy and equity markets in this final Private Client Letter for 2021. Our Outlook 2022 report is scheduled for publication in January.
Read MoreSeptember gave the U.S. equity markets its worst selloff since November of 2020. In my last Private Client Letter from one month ago, I observed that “a turning point may be nearing” as October is historically a positive month.
Read MoreSeptember lived up to its historical reputation for being a volatile and stressful month for equity performance. The S&P 500 finished the month down 4.8% marking its worst month since November 2020 and the index closed over 5% below its record high for the first time this year.
Read MoreOver the years, Clearwater Capital Partners has maintained the discipline of establishing specific targets for a variety of economic indicators and capital markets. These forecasts are intended to bring practical application and transparency to our economic thesis. Our predictions revolve around highly recognized measurements and indexes; and this tradition provides our readers with a straightforward means by which to monitor the efficacy of our outlook.
Read MoreEconomists and analysts began the year with relatively muted expectations for the U.S. economy. Emergency use authorizations for COVID-19 vaccines were just being issued and there was much uncertainty surrounding their availability and efficacy. Understandably, most forecasts for the reopening of the economy were cautious, if not grim. At the beginning of the year our country was still very much in lockdown mode and while hopeful, true optimism was hard to come by.
Read MoreHard to believe it, but we have reached the midpoint of 2021 already and have finished one of the best first-half starts in years. In fact, with a gain of 14.4% it was the S&P's second best first-half performance since 1998. For the record, the Dow ended the first-half with a 12.7% gain, the Nasdaq with a 12.5% gain, and the small-cap Russell 2000 with a 17.0% gain!
The S&P has now advanced more than 5% in five consecutive quarters - for only the second time in history (1953-1954). Back then, stocks added another 26.4% over the next four quarters, so perhaps we should be open to the possibility for continued strength in the second half of the year and into 2022.
Everything about the past year-and-a-half has been unique and it is as important as ever to maintain an intelligent framework for decision making. To this end, we are pleased to present our Outlook 2021 Mid-Year Update. Here you will find our latest forecasts for what may be coming our way.
Read MoreU.S. equities continue to grind higher as we move into the summer months. Following a minor pullback of about 4% for the S&P 500 (and nearly 7% for the NASDAQ) early in May, stocks have been broadly rebounding. As June begins, the U.S. equity markets stand within striking distance of reaching new all-time highs.
Optimism over much better COVID-19 data, the reopening of our economy and the anticipated wave of activity in the second half of the year, continues to support stock prices. While recent economic readings have been mixed, consumer sentiment remains strong and both industrial production and manufacturing activity are now up substantially from a year ago.
Read MoreThe pace of economic recovery, following the painful COVID-19 shutdowns, appears to be accelerating. The initial estimate of real GDP growth shows that the economy surged at an annual rate of 6.4% in the first quarter of 2021. Double-digit personal consumption growth led the way in the first three months of the year due to widely available vaccines and fewer restrictions on business activity.
Read MoreIt has been just over a year since the equity markets hit their COVID-19 lows. On Monday March 23rd, 2020, the broad indices all hit new lows after nearly a month of indiscriminate selling as the scope of the pandemic became clear. Since then, the Dow Jones Industrial Average and the S&P 500 have both gained just about 80% and the NASDAQ 100 is up about 90%. Many large cap stocks have doubled, tripled or more from their panic-induced 2020 lows.
Read MoreThe COVID-19 pandemic continues to dominate our lives, the economy and capital markets. Our base case for the economy and markets presented in our Outlook 2020 report, published just last January, has been wiped out by the COVID outbreak. We must now reconstruct our expectations for the balance of the year – while assessing a recovery that will likely stretch into 2021 and 2022.
Read MoreTo say that we are living in “interesting times” would not do justice to what we all have experienced since the COVID-19 outbreak made headlines in February. What began as a serious health crisis quickly turned into an economic collapse as government leaders issued lockdown orders and essentially brought large parts of our economy to a standstill. Never before has the United States shut off its economy by proclamation. Interesting times indeed!!
Read MoreDisclosures:
THIS COMMENTARY HAS BEEN PREPARED BY CLEARWATER CAPITAL PARTNERS. THE OPINIONS VOICED IN THIS MATERIAL ARE FOR GENERAL INFORMATION ONLY AND ARE NOT INTENDED TO PROVIDE OR BE CONSTRUED AS PROVIDING LEGAL, ACCOUNTING, OR SPECIFIC INVESTMENT ADVICE OR RECOMMENDATIONS FOR ANY INDIVIDUAL. ALL ECONOMIC DATA IS DERIVED FROM PUBLIC SOURCES BELIEVED TO BE RELIABLE. TO DETERMINE WHICH INVESTMENTS MAY BE APPROPRIATE FOR YOU, PLEASE CONSULT WITH US PRIOR TO INVESTING. INVESTING INVOLVES RISK WHICH MAY INCLUDE LOSS OF PRINCIPAL. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities, insurance products, or to adopt any investment strategy. The opinions expressed are as of the date of writing and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Clearwater Capital Partners to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. S&P 500 is a registered trademark of Standard & Poor’s Financial Services, a division of S&P Global (“S&P”) DOW JONES, DJ, DJIA and DOW JONES INDUSTRIAL AVERAGE are registered trademarks of Dow Jones Trademark Holdings (“Dow Jones”). NASDAQ-100 Index®, NASDAQ-100®, NASDAQ Composite Index® are registered trademarks of The NASDAQ OMC Group, Inc. The two main risks related to fixed-income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments.
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