Market Commentary — August 1, 2022

Markets posted solid gains last week as the Fed raised interest rates by another 75 basis (0.75%) points as expected. Second quarter GDP was negative for the second consecutive quarter, coming in at -0.9%. In a “bad news is good news” scenario, investors are betting the Fed will need to be less aggressive going forward with rate hikes to fight inflation.

Also boosting market sentiment were better-than-feared earnings from tech giants such as Amazon, Apple, and Google’s parent Alphabet. The big earnings disappointer last week was Walmart, which said food inflation was cutting into shopper spending. But like fellow retailer Target, Walmart had the inventory mix wrong for post-pandemic moods. And Intel had a terrible earnings quarter due to chip shortages amid PC demand weakness. Let’s face it – we all just got new PCs so we could work from home.

Fed Chair Powell’s dovish tone caused the U.S. Treasury yield curve to steepen, with intermediate- and short-term yields declining and long-term rates holding steady. The rate and GDP news also sent mortgage rates tumbling, as they are most correlated with the 10-year note, falling to 5.13% on Friday from 5.54%, earlier in the week. This was welcome news for the housing market.

Posting two-quarters of negative GDP, are we in a recession? The official government agencies and the Fed still say no. How rare is that? The last time it happened was 1947 according to Carson Group’s Ryan Detrick.

In ETF news, clean energy ETFs rose on news that Sen. Joe Manchin agreed to back a $370 million climate and energy spending package that includes tax credits for EVs, renewable energy projects, and clean hydrogen.

Schwab launched a Crypto Thematic ETF, providing exposure to companies “that may benefit from the development or utilization of cryptocurrencies and other digital assets.” Sounds a lot like the BLOK ETF to me. Meanwhile, Cathie Wood’s ARK funds are dumping Coinbase stock.

Barron’s had a feature on buffered ETFs and how they have worked in a down market. The problem is, the market is back to “game on”, with growth and beta the two best factors in July.

Have a great next week as we move into August.

Jane Edmondson
CEO and Co-Founder

About

EQM Indexes LLC is a woman-owned firm dedicated to creating and supporting innovative indexes that track growth industries and emerging investment themes. Co-founded by Jane Edmondson, a former Institutional Portfolio Manager with more than 25 years in the investment industry.

Disclosure

The information provided on this page is for illustrative purposes only and is not intended to serve as investment advice. The information provided is as of particular time and subject to change at any time without notice.

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. EQM Indexes does not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. EQM Indexes Indices makes no assurance that investment products based on the Index will accurately track index performance or provide positive investment returns. EQM Indexes is not an investment advisor, and makes no representation regarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any of the statements set forth in this article. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by EQM Indexes to buy, sell, or hold such security, nor is it considered to be investment advice.