The 3.9% sell-off on Monday pushed the S&P 500 into a bear market, as the index’s decline from a record high achieved on January 3, 2022, exceeded 20.0%. The NASDAQ has been in a bear market since March, while the Dow on Friday was just shy of a bear, as it was 18.7% below a record set in January. It’s important to remember that bear markets are a natural part of the market cycle and often present opportunities for investors.
Policy Tightening
The 0.75% rate increase that the U.S. Federal Reserve approved on Wednesday marked the biggest hike since 1994 and left the Fed funds target rate at a range of 1.50% to 1.75%. Chair Jerome Powell said that the Fed may slow the pace of rate increases in September if economic growth slows too much
Warning Signs
U.S. retail sales slipped 0.3% in May, falling for the first time in five months amid rising inflation. A separate report showed that industrial production grew at a slower pace last month while factory production fell for the first time in four months.
Value vs. Growth
The U.S. growth stock index fell 5.1% for the week compared with a 6.6% drop for a value index, briefly interrupting the value equity style’s wide year-to-date outperformance versus growth. Year to date, a growth index was down 30.3% compared with value’s 15.2% drop.
We believe there is still reason to be optimistic. The U.S. economy continues to show signs of strength, with unemployment remaining at historically low levels and GDP growth remaining positive. We will continue to monitor the situation closely and will provide updates as needed. In the meantime, if you have any questions or concerns, please do not hesitate to contact us.