While market optimists are scarce these days and the list of investor concerns is long, there are several historical patterns that provide reasons for optimism as the second half of 2022 gets underway.

First is stocks’ record of strong bouncebacks from big two-quarter drops. The average gain over the next sixth months after the biggest two-quarter drops since WWII has been 21.5%.

Favorable July seasonality is another reason. Over the past 10 years, the S&P 500 Index has risen an average of 2.5% during July, marginally behind only April and November for the top months over that time period.

Bonds – Is the Worst Behind Us?

The first half of 2022 came to an end last week, and some fixed income (bonds) investors may see the historic drawdowns experienced during the first six months of the year. These are a result of rising interest rates.

Recently LPL Fixed Income Strategist Lawrence Gillum reviewed the first half of 2022. We believe there is a good case to be made that historically bad returns may be behind us and why we think now is not the time to abandon core bond allocation.

All Weather Investing

We are living through a pivotal time in history, marked by geopolitical realignment, high inflation, volatile financial markets, and the end of a 40-year period of declining interest rates. In my 28 years in the financial services industry, the economic symptoms are similar but the causes are different. Despite these challenges, we remain optimistic about the investing environment for several reasons.

First, there are still signs of growth as the global economy recovers from the pandemic.

Second, we believe corporate earnings will be the driving force of equity markets going forward, as opposed to multiple expansion, and that signifies a welcome return to fundamentals.

Third, if we experience a recession in the next year or two, it will be a healthy recession. Despite all the worry about it, we see a moderate recession as necessary to clean out the excesses of the past decade. You can’t have a sustained period of growth without an occasional downturn to balance things out.

It’s normal… It’s expected… It’s healthy… It’s nothing to be afraid of, trust the investment process.

As always, if you have any questions or concerns please contact Michelle and schedule a 15 minute call, let’s talk about it.