Dear Client/Partner/Prospective Client:
As we make our way into the halfway point of summer 2022, there is some hope with rising inflation subsiding. Gas prices have come down under $5/gallon for the first time in months, which will help keep travelers on the road for their vacations and summer road trips. The Federal Reserve seems poised to raise rates another .75bps in the upcoming weeks and the national average for a 30-year mortgage rate dropped to 5.30% last week, even though home purchases under contract in June, skyrocketed to 60,000 deals being cancelled by spurned buyers. On top of that nonfarm payrolls increased by 372,000 in June, which is a very encouraging sign. Average hourly earnings rose 5.1% from a year earlier and the unemployment rate was unchanged from May at 3.6%. All positive measurements in looking at our economy. The continued talks of entering a recession or even in one already now is being defied by the previously mentioned jobs numbers. People are working but the changing of jobs for better wages continues to accelerate. Also, the people that don’t want to work or are not even looking for employment is decreasing.
There is also a reverse currency war going on in attempts to devalue the U.S. dollar. In 2008 we ‘won’ that war as we came out of the financial crisis with a strong dollar. In 2022, we are ‘winning’ again as several other countries struggle with their inflation to a much greater degree than we have struggled. Granted it hasn’t been all sunshine and rainbows for the U.S. either. The Federal Reserve has been the most aggressive Central Bank utilizing monetary policy and it is doing so again this year. The European Central Bank says it will raise rates but has not and the Bank of Japan said it will not raise them to combat inflation. Time will tell if this works but it is paying off slowly but surely.
Regarding the markets and our portfolios, we increased out cash position in May to help soften the blow. Markets continue to be volatile but are consistently going in the wrong direction. Some of the biggest winners over the last 10-12 years have been hit the hardest including, technology, retail, and financial services. Energy continues to be strong, though down recently, and some food staple companies, and health care companies continue to look solid in the first half of 2022. We’ve seen a few signs that we may be coming out of this pullback, however, let’s see what earnings season turns out for us as we start two and one-half weeks of craziness with the companies that we own and watch. Enjoy this steamy summer!
Sincerely,
J.B. L’Esperance, ChFC
If you have questions about our strategies or would like to open an account with Barking Sands Capital, please give us a call at 952.500.8854 or 248.687.1400.