A Decade of Calm Julys

We just finished the longest bear (down) market since Elvis’ “Jailhouse Rock” was a top hit. (That was 1957-58.) How did we finish a bear market? As a reminder, a bear market is a drop of more than 20% from a recent highwater mark. From January through October last year, the S&P 500 index dropped 24%.

There’re a lot of reasons for the drop, but the main cause is the Federal Reserve’s most aggressive interest rate hikes since … well, forever. This policy decision convinced almost everyone that we were going to have a recession. And we still could have one. Inevitably, there will be a recession in the future because they do come and go.

I’m not convinced that we’ll have one in the immediate future, nor that the FED’s actions will lead directly to one.

And now it’s summer.

Who wants to think about bad economics during the summer?

Most people don’t. In fact, according to a recent article in the Wall Street Journal, July is the least volatile month of the year for the past decade.

Here’s where the compliance people want to remind you that past performance has no bearing on future performance. In other words, this July or this summer could be a lot different.

But I’m not counting on things being a lot different this summer because while the world is in turmoil, American businesses are quietly making money. Less than during the overstimulated past two years, but still making money.

And when most businesses are making money, most workers keep working.

And when most workers are working, consumers keep spending.

And when consumers are spending … well, I learned a long time ago to never bet against the American consumer’s ability to spend money.

As a reminder, over two-thirds of the US economy is consumer spending.

Now, if we have a recession, it’ll mean lots of workers will lose their jobs. The most recent open jobs numbers indicate that there are still more open jobs than workers looking for them. In fact, the latest number of open jobs, north of ten million, is still bigger than the pre-pandemic peak, around seven million, according to JP Morgan’s Dr David Kelly.

They might not be spending it on stuff like they did in the past. In fact, there’s a fundamental shift from buying things to creating memories and enjoying experiences. That’s tough on companies selling stuff, but good for those providing services. It’ll probably take a while for the economy to sort through these changing behaviors.

In the meantime, as I mentioned, we climbed out of the bear market. That’s because from the bottom last October 14, the S&P 500 index climbed over 20%, breaking through that threshold in mid-June 2023. Once we hit that milestone, investors became more enthusiastic, and the market surged another few percent.

The markets and the economy are still a long way from record-setting numbers. I believe it’ll be a long time before we see interest rates move out of the mid-single digit range, and it’ll take some time for everyone to get accustomed to these rates.

If something showstopping happens to the economy, our clients know that we’re monitoring and adjusting as appropriate, making our best efforts to navigate these relatively calm markets.

In the meantime, enjoy the summer months.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Enduring Wealth Advisors, LLC, a registered investment advisor. Enduring Wealth Advisors, LLC and Enduring Wealth Advisors, INC are separate entities from LPL Financial.

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