When I woke up this morning, I saw the hot air balloons above the horizon to the east. I heard the rat-a-tat-tat of the neighbors’ sprinkler on the west side of the yard. Migrating downstairs, I brewed a cup of drip coffee after downing my obligatory wake-up mug of water. I’m a bachelor for a few days, otherwise I’d already have a full pot waiting.

What’s in the news this morning?

The calendar turned over a new month last weekend, and the stock market had its best-ever return for the month of July. It was also the best one-month increase since 2020. 77% of all stocks are now priced above their 50-day moving average. *

What caused the turnaround last month?

Reading deeper into June inflation numbers, a change in the momentum of inflation appeared.

Like when I slam down the accelerator to get to freeway speeds, then settle into a high-speed cruise control. Inflation is still high, but it doesn’t seem to be climbing and, in some sectors, maybe it is easing a bit.

And then the phone rang.

“Hey, good morning!”

“You’re up early, and unusually chipper. What’s up?”

“Have you talked with mom and dad about getting them down here?”

“Nope. I’ll call them later. How’s the plans going? Need anything else from me?”

“You got the Costco list?”

“Yep, I’ll get everything tomorrow afternoon.”

“Good. Can’t wait to see you tomorrow night! Hey, I’ve got to go. Love ya!”

“Love you too. Bye”

Another positive sign is coming out of corporate earnings reports. With over half the companies reporting, 62% beat their revenue estimates, growing at a 12.3% rate, while 72% beat their earnings estimates, producing a 5.9% EPS (Earnings Per Share) growth rate. *

Well, that cup of coffee is gone. Time to work out. Hmm. Four miles keeping my heart rate in zone two, building aerobic fitness.

Add a Nuun electrolyte tablet to a chilled bottle of water. Got to keep hydrated. It’s already over 70°, climbing into the 90’s later today.

Dr. Kelly, Chief Global Strategist at J. P. Morgan Asset Management, is in my podcast feed. He sounds optimistic, but after a detour into the technical definition of a recession he exposes some potential potholes in the unusually strong labor market.

Potholes led to a few turned ankles over my running career, but never caused any serious injury.
The current economic drags come from the withdrawal of government stimulus, weakness in exports due largely to the strong dollar, and the slowdown in residential real estate. Which means we could experience a mild recession sometime in the next 18 months.

Or not.

Economists are split down the middle on the probability of a recession, but the rational ones agree it’ll be mild at worst. Nothing like the financial crisis of ’08, nor the complete shutdown two years ago.

It’s difficult to fathom a recession when there’s virtually full employment, and strong corporate earnings, and consumers traveling and spending, despite getting less for their money.

Finishing today’s route, I turn a corner climbing up a hill to the end. It’s a good habit to “finish strong” so despite keeping the heart rate in check so far, it’s pedal to the metal for the last quarter mile. Up a 6% grade. Then a shower followed by my signature “bee’s knees” latte. (Ask me for the recipe.)

We know that this year has seemed difficult, and we will keep on daily monitoring, opportunistically adjusting portfolios, and attempt to keep you informed as we navigate through yet another unusual economic season.

As always, please reach out with any questions or concerns, keep moving forward, and drop by for a coffee, mineral water, or sports drink, if you’re in the neighborhood.

*Source: All data provided by LPL Research Market Signals 8-1-2022.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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.