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7/1 Market View Weekly

7/1 Market View Weekly

July 07, 2022
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Market Update

Observations 


U.S. equities moved lower this week as indicated by the S&P 500 which was down -2.18% on the week.

In the U.S., smaller sized companies outperformed their larger-sized counterparts, as the Russell 2000 index decreased -2.09% on the week.

International stocks as measured by the MSCI EAFE were negative on the week, down -2.19%, slightly underperforming domestic stocks.

Emerging market stocks were negative on the week with the MSCI EM index down -1.58%.

U.S. investment grade bonds were positive last week with the Bloomberg Barclays U.S. Aggregate Bond index up +1.60%.

ALL IN THE SAME BOAT - As of 6/16/2022, central banks in 45 nations globally have raised interest rates in an effort to bring down the spending demand of consumers in their respective countries.  The Federal Reserve has raised rates 3 times this year, most recently on Wednesday 6/15/2022.  The hikes were 0.25 percentage points, 0.50 percentage points and 0.75 percentage points (source: FactSet).  

THAT’S GOING TO HURT - The annual interest cost on the US national debt is forecasted to be $399 billion for the current 2022 fiscal year (i.e., the 12 months ending 9/30/2022), then rising to $1.194 trillion a decade down the road during fiscal year 2032.  10 years ago (fiscal year 2012), the annual interest cost on the national debt was $220 billion (source: Congressional Budget Office).  

WE DO LIKE TO SPEND - The US national debt, $30.42 trillion as of Thursday 6/23/2022, is forecasted to increase +49% to $45.35 trillion as of 9/30/2032 or 10 years from now.  The national debt was $16.07 trillion as of 9/30/2012 or 10 years ago (source: Congressional Budget Office).

Reprinted with permission from BTN. Copyright © 2022 Michael A. Higley.

[1] Data obtained from Bloomberg as of 7/1/2022

Index Definitions

S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.

Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as
of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.

MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.

MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

Bloomberg Barclays US Agg Bond: The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

Bloomberg Barclays High Yield Corp: The Bloomberg Barclays US Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition,
are excluded.

Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.

Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.

Disclosures

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.

The statements provided herein are based solely on the opinions of the Advisor Group Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Advisor Group or its affiliates. Certain information may be based on information received from sources the Advisor Group Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Advisor Group Research Team only as of the date of this document and are subject to change without notice. Advisor Group has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Advisor Group is not soliciting or recommending any action based on any information in this document.

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