Good work, July. You gave us the best month in the stock market since November, 2020. And not only that, you managed to have bonds make money after a dismal start to the year. All this while inflation is still way too high, and the Fed is raising rates. What gives? Heritage Financial’s Chief Investment Officer, Bob Weisse, and I tried to explain this in our latest Wealthy Behavior podcast. Some of it is that bad news can be good news for the markets.
Recession expectations have increased. You’re hearing less about a soft landing, and more about how long the recession will actually be. That’s the bad news.
A recession, or just a slowdown, should help with inflation. And we’re already seeing some signs of this with falling gas prices and rent and housing price increases slowing down. That’s the good news. The Fed’s medicine could be working.
This dynamic also helped the bond market. Inflation concerns lead to rising bond yields and falling bond prices. That’s what we had for most of the year. Recession concerns lead to falling bond yields and higher bond prices. That’s what we saw in July.
Be sure to listen in to the whole conversation as Bob also explains:
- Why he blames the Fed for 9% inflation
- The early signs of tightening that he’s seeing in the labor market now
- How investors could think about portfolio rebalancing in this environment
- Why he likes stocks and bonds going forward
- What the market wants to see next
Available through the link in title. Transcript available here.