Hope you are all doing well. Happy 4th of July! Stocks couldn’t maintain their positive momentum from the previous week’s rally, as the major U.S. indexes fell around 1% to 4%. For the S&P 500 and the NASDAQ, it was the 11th negative weekly result out of the past 13. I have broken down this week’s news using quotes from one of the lesser-known founding fathers, George Clymer. Clymer one of only six people to sign both the Declaration of Independence and the Constitution and one of the handful of signers of these documents that never owned slaves.
A printer publishes a lie: for which he ought to stand in the pillory, for the people believe in and act upon it.— George Clymer
Two key reports published this week seem to support the pundit forecasts of a bleak outlook for stocks. A report on U.S. manufacturing from The Institute for Supply Management which tracks manufacturing orders and employment suggests economic activity is contracting rather than growing. Another report from the Conference Board showed its monthly gauge of U.S. consumer confidence fell to its lowest level in 16 months. Don’t fall victim to doomsday pundits you see on TV. Sure, slower economic growth is ahead of us but that doesn’t mean stocks have to drop much further. Markets are a forward-looking indicator and have already been pricing this in. We are in a bottoming process. A bottoming process has three components to look for. First, the markets correct, that has already happened. Second slowing economic data which is starting to occur. Finally, earnings data being revised lower and softening corporate earnings which we could see next month. Historically, markets can bottom and start to recover, even as economic and earnings fundamentals are still moving lower.
Among the expected glories of the Constitution, next to the abolition of Slavery was that of Rum.— George Clymer
Clymer would not approve of you making yourself a stiff drink, but you may need one when you get your June statement. As June concluded, the S&P 500’s closing level on Thursday was down 21.0% from the start of the year, marking the index’s worst first-half performance of any year since 1970. As for June’s monthly result, the index was down 8.4%, the worst June performance since 2008. As uncomfortable as it is right now it is critical to remember that bear markets always lead to bull markets. Bull markets tend to be longer and stronger than the downturn that preceded it. Since 1950, the average bear market has returned -34% and lasted 15 months. The average bull market has returned +167% and lasts more than three and a half years.
My calendar link is below. If you haven’t done so I encourage you to schedule a review.