“Cheer up!”, they said. “Things could be worse.” So, I cheered up and sure enough,
things got worse. Yes, it’s an old joke but it seems appropriate. The performance of
equities in the first half of 2022 was worse than any time in the last half-century. The
NASDAQ had its largest January-June drop in its entire history. The Dow suffered its
biggest first half drop since the Cuban Missile Crisis. That was 1962.

So, how did we get here? And where are we going?

You will recall that the year began with another Covid related scare as the Omicron
variant appeared. Quick on the heels of that was the breakout of the Russia-Ukrainian
conflict. Decades-high inflation brought in policy changes that pushed interest rates
higher and is thought by many to be ushering in a recession. Indeed, some economists say
we’re already there. Much of the conversation is speculating on the question of how
much of the market’s draw-down has already priced-in a recession. It’s hard to answer
that question but we feel that in general a lot of the re-valuation has occurred but there
could be a bit more to come. Is it time to get back in the water? Only if you are very, very
brave. And remember that there is a very thin line separating Very Brave from Foolish.
Economic data released on Thursday brought no comfort either; disposable income
inched lower, consumer spending decelerated, inflation remained hot and jobless claims
inched higher.

Are there any bright spots? Well, I think so. If we are going to have a recession, it’s
better to go ahead and have it than to try to deal with the threat of a bogeyman. As we
always say, it is wiser to react to conditions that actually exists than to predict things that
may, or may not, happen. So, for the moment, we will just say “Watch this space.”
Meanwhile, we hope you will join us in wishing America a Happy Birthday and that you
will spend some quality time with friends and family. Our country may have its faults but
we’re working on making it better. The preamble to the Constitution speaks of ‘forming a
more perfect union’ and that clearly is a work in progress. We’ve come a long way
towards fulfilling that promise. Americans, working together, will continue to move us
closer to the goal.

Ron’s Market Minute – Whipsaws
This year, pretty much at the end of each month, I’ve used the phrase ‘good riddance’.  Also
said that and the end of the first quarter, and now at the end of the half.  None of these
timeframes have been easy. 

There are now a bunch of seasonal headwinds to look at as we begin July. July is strongly
bullish during bull markets, and quite flat in bear markets. Summer months in general are less
than exciting, although it is common to see a major bottom in the fall.  On a very short-term
basis the first week in July tends to be positive, but this morning’s futures were not looking
particularly positive. To repeat myself: seasonal trends are only a modest indicator and are
definitely not a clue for investment planning. 

Last Thursday’s bullish up-day was by itself rather interesting, but then this week Monday
markets gave all the gains back. We’ve seen a number of potential market lows, but the rallies
that came next have been short-lived, have ended sooner, and have had a lower magnitude
that I would have expected. This behavior is more indicative of a bear market than most would
like, I’d guess. I’ll include myself in that group.

A few of our readers have asked for a sign that the trend has turned back to the upside. That is
always a very difficult question as risk appetites vary a great deal from person to person.
Those who are looking for a solid, low-risk indicator will likely still be waiting after the next bull
market has already given us gains of 20 percent or more.  Those looking for earlier signs and
more sensitivity to price most certainly run the risk of being whipsawed- more than once.  Even
this year’s strongest suits – energy and commodities – appear to have given up their strength
at this time.

So here we are. An uncomfortable place as we’ve seen a number of times over the past. I feel
that I must share one question that I’ve heard now at least a couple of times.  That is ‘Is there
anything that bothers you about THIS bear market?’. My answer: it will pass when it’s ready,
and we hope (and expect) that by avoiding as much of the drawdown as we can, clients will
have smaller gaps to overcome when the markets move on to the next Bull phase. A concern
(because I read all of those scary headlines, just like you do) is that the media seems to
trumpet that you-all are scared something fierce!  We proactively reach out to those that we
believe are less risk-tolerant, and we’re not hearing the fear in your voices. That’s my
concern. Are all of you immune to the headlines?  Or afraid to share your concerns? 
If you’re immune, kudos to you!  If you’re just not sharing your concerns, please open up and
share with us!

And with that, we’ll leave you to enjoy the birthday of our wonderful country. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite D406A
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com
LFS-4829787-070122
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