Market Share Newsletter Vol 4 Issue 14


July 6, 2022

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The first half of 2022 has been difficult for investors as the reality of inflation and growing concerns of a recession have led to declining values for most investments.
The U.S. government and Federal Reserve (the Fed) took extraordinary steps to financially support businesses and consumers during the 2008-2009 Great Recession and the more recent global pandemic. The period of “easy money” is quickly slowing and investment markets are adjusting to a new environment.
The chart above illustrates the spikes in government spending on stimulus bills and the more-than-doubling of the Federal Reserve’s balance sheet. While it supported the economy during the height of the pandemic, we are now seeing the effects with unacceptable levels of inflation and the Federal Reserve raising interest rates rapidly.
In the months ahead we will see government spending move back to trend (red line) and the Fed’s balance sheet will begin to shrink, thus removing hundreds of billions of dollars out of the economy.
Swift changes to markets, particularly to the downside, are common. An investment adage describes that bull markets go up the escalator and bear markets take the elevator down. The next chart shows this scenario over the past decade (2015, 2018 and 2020 are examples).
Periods of transition and adjustment are always difficult for investors given the volatility we are presently experiencing. We also know that corporations and consumers adapt to market conditions over time. There have been periods of much higher interest rates, slowing or falling corporate earnings, and inflation. These transitions can last months (as it did during the pandemic) to a couple of years (like 2008-2009). It is in these situations that investors start to climb the escalator back up and where the next opportunities begin to arise. While managing portfolios through this cycle, we remain vigilant as opportunities begin presenting themselves.
Paul Gifford, CFA
Chief Investment Officer
Wealth Advisory Services
Investment Management Group
Erik Clapsaddle, CFA, CFP®
V.P. and Sr. Fixed Income Portfolio Manager
Wealth Advisory Services
Investment Management Group
The information in this email was prepared from sources believed to be reliable; it is for informational purposes only and does not provide recommendations based on the investment objectives, financial situation, or needs of any individual or entity. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets. The information in this email is not a comprehensive statement of the matters discussed. Unless specifically indicated otherwise, this email is not an offer to sell or a solicitation of any investment products or other financial product or service or a confirmation of any transaction. If you have questions about the information in this email, please contact your trust administrator at 1st Source Bank Wealth Advisory Services or call 800 882-6935. Investment and Insurance products are:
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  • Subject to investment risks, including possible loss of the principal amount invested

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.