Q3 Outlook John Rothe CMT
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John Rothe CMT, Founder and Chief Investment Officer thought's on what lies ahead for the next quarter.
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Q3 Outlook John Rothe CMT
- 1. See disclosures at the end of the presentation. 10 Market Themes for 3Q 2022 As of July 1, 2022 www.riverbendinvestments.com
- 2. See disclosures at the end of the presentation. 10 Market Themes for 3Q 2022 This collection of market insights highlights 10 themes we believe are most likely to shape the investment environment this quarter. 1. Speed & Magnitude of Interest Rate Increases Across Tightening Cycles 2. Year-to-Date Stock & Bond Returns Highlight 2022’s Unique Environment 3. Higher Interest Rates = Lower Stock Valuation Multiples 4. Bitcoin & Cryptocurrency Assets Continue to Trade Lower 5. Higher Interest Rates Start to Impact the Housing Market 6. Retail Sales Data Shows Inflation’s Impact on Consumer Spending 7. Bond Yields Rise as Fed Tightens & Investors Reprice Credit Risk 8. Seasonality Patterns Suggest Gasoline Prices Could Decline This Fall 9. Inflation Relief on the Horizon? 10. Corporate Earnings Estimates Could be Revised Lower John Rothe, CMT Founder & Chief Investment Officer johnrothe@riverbendinvestments.com 2
- 3. See disclosures at the end of the presentation. Speed & Magnitude of Interest Rate Increases Across Cycles 3 Disclosures: Data is sourced from Federal Reserve. July 2022 projection based on CME FedWatch Tool as of 6/30/2022. Cumulative Change in the Federal Funds Rate Indexed to Zero First Week of Interest Rate Increase U.S. Federal FundsTarget Rate (%) Historical Federal Funds Rate (1987-Present) Mar-88 3.25% Feb-94 3.00% Jul-99 1.75% Jul-04 4.25% Dec-16 2.00% July 2022 Projection 2.25% 0% 1% 2% 3% 4% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 # of Weeks Since First Interest Rate Increase of Cycle 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Tightening Cycles Fed Funds Rate
- 4. See disclosures at the end of the presentation. Year-to-Date Stock & Bond Returns Highlight 2022’s Unique Environment 4 Disclosures: Data is sourced from MarketDesk. Note: Returns represent total returns, which include dividends and interest received. 2022 YTD performance is calculated as of 6/30/2022. [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] -20% -10% 0% 10% 20% -50% -25% 0% 25% 50% Bloomberg U.S. Bond Aggregate Total Return S&P 500 Total Return
- 5. See disclosures at the end of the presentation. Higher Interest Rates = Lower StockValuation Multiples 5 Disclosures: Data is sourced from MarketDesk and Federal Reserve. Past performance does not guarantee future results. Rising interest rates tend to pressure stock market valuations lower.
- 6. See disclosures at the end of the presentation. Bitcoin & Cryptocurrency Assets Continue toTrade Lower 6 Disclosures: Data is sourced from CME Group and is based on CME’s Bitcoin Futures Contracts. $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 Aug-18 Feb-19 Aug-19 Feb-20 Aug-20 Feb-21 Aug-21 Feb-22 Bitcoin Price in USD Bitcoin has fallen nearly -70% since November 2021
- 7. See disclosures at the end of the presentation. 2% 3% 4% 5% 6% 7% 8% 9% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 ❶ 30-Year Fixed Mortgage Rate Higher Interest Rates Start to Impact the Housing Market 7 Disclosures: Data is sourced from Federal Reserve, National Association of Realtors, and University of Michigan. 50 75 100 125 150 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 ❷ Housing Buying Conditions 3,000 4,000 5,000 6,000 7,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 ❸ Existing Home Sales (000s) -20% -10% 0% 10% 20% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 ❹ Case Shiller Home Price Index (1-Year Change) Rising Interest Rates Push Mortgage Rates Higher… ... Which Weakens Home Buyer Sentiment … ... Which Translates into Fewer Buyers… ... & Could Stall Home Price Growth
- 8. See disclosures at the end of the presentation. -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1-Year Change in Retail Sales (excluding food) Y/Y Change in Retail Sales 12-Month Moving Average Retail Sales Data Shows Inflation’s Impact on Consumer Spending 8 Disclosures: Data is seasonally adjusted and sourced from U.S. Census Bureau. To smooth the trend, retail sales excludes food which is historically a more volatile segment. 1-Month Change -4% -1% -1% 0% 0% 0% 1% 1% 4% -6% 0% 6% Auto & Auto Parts Electronics/Appliances Home Furnishings Pharmacies Clothing Building Materials Restaurants Grocery Stores Gas Stations
- 9. See disclosures at the end of the presentation. BondYields Rise as FedTightens & Investors Reprice Credit Risk 9 Disclosures: Data is sourced from Federal Reserve and MarketDesk. Bond categories represented by the following indices: Developed Gov't Bonds (ICE BofA Developed Markets Sovereign Bond), Emerging Gov't Bonds (ICE BofA Emerging Markets Sovereign Bond), U.S. Bond Aggregate (Bloomberg US Aggregate), Mortgage Backed Securities (ICE BofA US Mortgage Backed Securities), IG Municipal Bonds (ICE BofA US Municipal Securities), HY Municipal Bonds (ICE BofA US Municipal High Yield Securities), IG Corporate Bonds (ICE BofA US Corporate), HY Corporate Bonds (ICE BofA US High Yield). 1.5 0.7 4.2 1.8 1.9 1.1 2.1 2.4 4.3 3.1 2.2 5.0 3.8 3.8 3.3 4.7 4.8 8.8 U.S. 10-Year Treasury Developed Gov't Bonds Emerging Gov't Bonds U.S. Bond Aggregate Mortgage Backed Securities IG Municipal Bonds HY Municipal Bonds IG Corporate Bonds HY Corporate Bonds December 31, 2021 June 30, 2022 Yield to Worst Across Bond Types (%)
- 10. See disclosures at the end of the presentation. 0% 20% 40% 60% 80% 100% 0% 10% 20% 30% 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec Average YTD Change in Gas Prices Since 2000 (Left Axis) YTD 2022 (Right Axis) Seasonality Patterns Suggest Gasoline Prices Could DeclineThis Fall 10 Disclosures: Data is based on New York Harbor RBOB Gasoline Front Month Futures. Sourced from CME Group. Gasoline prices historically reach their peak during the summer months before falling during the second half of the year. Average Year
- 11. See disclosures at the end of the presentation. -60% 0% 60% 120% -1% 0% 1% 2% 3% 4% 5% 6% 7% 2015 2016 2017 2018 2019 2020 2021 2022 2023 Core Consumer Price Index (Left Axis) 1-Year Change in Job Openings – Advanced 6-months (Right Axis) Job openings historically lead CPI inflation by 6 months, suggesting inflation pressures could ease during the second half of 2022. -80 0 80 160 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 OECD Global Inflation (Left Axis) S&P GSCI Commodity ETF – Advanced 3-months (Right Axis) Inflation Relief on the Horizon? 11 Disclosures: Data is sourced from MarketDesk, OECD, Federal Reserve, and U.S. Census Bureau. Job Openings vs CPI Inflation 1-Year Change; Job Openings Historically Lead by 6 Months Commodity Prices vs Global Inflation 1-Year Change (%) Commodity prices historically lead global inflation by 3 months, suggesting inflation pressures could ease during the second half of 2022.
- 12. See disclosures at the end of the presentation. -30% -20% -10% 0% 10% 20% 30 40 50 60 70 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ISM Manufacturing PMI (Left Axis) 3-Month Change in NTM S&P 500 EPS Consensus Estimate (Right Axis) Corporate Earnings Estimates Could be Revised Lower 12 Disclosures: Data is sourced from MarketDesk, FactSet, and Institute for Supply Management. Corporate earnings estimates are historically revised lower as the ISM Manufacturing PMI declines.
- 13. See disclosures at the end of the presentation. Definitions Consumer Price Index (CPI): Measures the changes in the price level of a basket of consumer goods and services purchased by households. Inflation: A general rise in price level relative to available goods and services. Producer Price Index (PPI): Measures the average changes in prices received by domestic producers for their output. Real Yield: Calculated as the Nominal Yield minus CPI rate. Unemployment Rate: A lagging economic indicator which is calculated as the percent of the labor force that is jobless. University of Michigan Consumer Sentiment Index: A monthly survey that asks consumers questions about their financial standing and views on both the current and future economy. ISM Purchasing Managers Index: The ISM manufacturing index, also known as the purchasing managers' index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. It is considered to be a key indicator of the state of the U.S. economy. Please see disclosures at end of presentation. 13 Questions? Get inTouch! Email john.rothe@riverbendinvestments.com
- 14. See disclosures at the end of the presentation. Definitions 2Y / 10Y / 30-Year Treasury Bonds: Treasuries are debt obligations issued and backed by the full faith and credit of the U.S. government. Bitcoin Futures: CME’s Bitcoin futures contract, ticker symbol BTC, is a USD cash-settled contract based on the CME CF Bitcoin Reference Rate (BRR), which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. The BRR aggregates the trade flow of major bitcoin spot exchanges during a one-hour calculation window into the U.S. dollar price of one bitcoin as of 4 p.m. London Time. CBOE Market Volatility Index (VIX): Measures the market's expectations of future volatility and is based on S&P 500 options activity Consumer Price Index (CPI): Measures the changes in the price level of a basket of consumer goods and services purchased by households. Federal Fund’s Rate: The target interest rate set by the Federal Reserve at which commercial banks borrow and lend excess reserves overnight. Federal Reserve: The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Forward Price to Earnings Ratio: The forward P/E ratio (or forward price-to-earnings ratio) divides the current share price of a company by the estimated future (“forward”) earnings per share (EPS) of that company. Growth Stocks: Growth stocks are companies expected to grow sales and earnings at a faster rate than the market average. Inflation: A general rise in price level relative to available goods and services. ISM Purchasing Managers Index (PMI): The ISM manufacturing index, also known as the purchasing managers' index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. It is considered to be a key indicator of the state of the U.S. economy. Price Return: The rate of return on an investment portfolio, where the return measure takes into account only the capital appreciation of the portfolio, not including income generated in the form of interest or dividends. Prime Interest Rate: A base rate used by banks to price short-term consumer and business loans. Real Earnings: Usual weekly earnings represent earnings before taxes and other deductions and include any overtime pay, commissions, or tips usually received. Real Earnings adjust these dollar amounts the Consumer Price Index. Real Yield: The interest rate earned on a fixed income investment after factoring in the impact of inflation as measured by the Consumer Price Index (CPI). Total Return: Return on a portfolio of investments including capital appreciation and income received on the portfolio. U.S. Labor Participation Rate: The percentage of the population that is either working or actively looking for work U.S. Total Payrolls: A measure of the number of U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed. This measure accounts for approximately 80 percent of the workers who contribute to Gross Domestic Product (GDP). Unemployment Rate: A lagging economic indicator which is calculated as the percent of the labor force that is jobless. Value Stocks: Stocks that are inexpensive relative to the broad market based on measures of fundamental value (e.g., price to earnings or price to book). 14
- 15. See disclosures at the end of the presentation. Disclosures and Legal Notice Riverbend Investment Management, LLC (“Riverbend”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The information in the presentation is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment-making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site. The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Riverbend Investment Management LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non- infringement, and suitability for a particular purpose. Riverbend does not warrant that the information on this site will be free from error. Your use of the information is at your sole risk. Under no circumstances shall Riverbend be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided on this site, even if Riverbend or a Riverbend authorized representative has been advised of the possibility of such damages. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized. 15
Editor's Notes
- Webinar Introduction Hello and thank you for joining us today. Welcome to the Quarterly Market Perspectives Client Webinar for the 3rd quarter of 2022.
- Key Talking Points Today we will be discussing several market moving topics and how they might impact your portfolio over the coming months.
- Key Talking Points The market’s focus on Federal Reserve policy remains unchanged as stubbornly high inflation forces the Fed to raise interest rates and shrink its balance sheet. The chart on the left side tracks the federal funds rate and shows the Fed’s rapid-fire interest rate increases starting in March 2022. How does this tightening cycle compare to prior cycles? The most notable difference is the speed and size of the interest rate increases. The chart on the right compares the current cycle’s federal funds rate path against the last five cycles. Factoring in the +0.75% increase at the June meeting, the Fed has raised interest rates +1.50% since the first increase in March. Investors expect the Fed to maintain its +0.75% pace at the late-July meeting, which would make 2022 the fastest +2.25% increase compared to the last five cycles. Investors expect the Fed to keep raising interest rates at its meetings later this year, although the number and size of the increases remain open questions. From a historical perspective, the chart shows the current Fed tightening cycle has more in common with the 1988 and 1994 cycles than post-2000 cycles. It’s a market environment investors haven’t experienced in a long time. The Fed’s aggressive actions are being driven by widespread price pressures across food, energy, housing, airfares, vehicles, etc. There are concerns high inflation could become entrenched, as well as significant uncertainty about how high and fast the Fed will need to raise interest rates to contain inflation. This raises a particularly concerning risk – persistently high inflation could provoke the Fed to tighten too much and negatively impact economic growth. The result is a market trying to navigate uncharted waters.
- Key Talking Points The first slide showed how fast the Federal Reserve is raising interest rates, and this slide shows the financial market impact. The Fed’s aggressive tightening actions are increasing market volatility and causing stock and bond prices to trade lower. The S&P 500 is now in a bear market, which is defined as a -20% decline from recent highs, and interest rates sit near multi-year highs. The 2-year Treasury yield recently rose to its highest level since 2007 as investors bet 40-year high inflation will push the Fed to be more aggressive. This scatter plot compares annual stock and bond returns since 1989. The dots represent the intersection of the S&P 500’s total return and the Bloomberg U.S. Bond Aggregate’s total return for each calendar year. The analysis highlights the challenging and unusual start to 2022. The ‘YTD 2022’ dot is the only dot in the lower left quadrant with stocks and bonds both declining more than -10% this year. If 2022 ended today, it would mark the S&P 500’s third worst year, and bond’s worst year, since 1989. How unique is the current market environment? You will notice every year since 1989, except for 2022, is outside of the lower left quadrant. This indicates it is rare for both stocks and bonds to produce negative returns during a calendar year. Why are stocks and bonds declining together? The Federal Reserve is raising interest rates and shrinking its balance sheet by selling bonds, which pressures both stock and bond valuations. On the credit side, most bonds pay a fixed interest rate, which means bond prices must decline to offer a higher interest rate. On the equity side, interest rates represent the cost of money and are used as an input to value company shares. A higher interest rate typically decreases stock prices.
- Key Talking Points One of the main investment themes this year has been the decline in company valuations as interest rates rose. Why? In a world of negative real (i.e., after inflation) yields and low interest rates, investors are willing to take on more risk to generate a positive after inflation return. With interest rates and yields rising this year as the Fed tightens, investors now theoretically need to take less risk to generate the same return. This means riskier assets should decline in value to provide a more attractive risk-adjusted return. On a conceptual level, this is the messy valuation process the market is currently working through. It is trying to find the correct theoretical fair value of a company’s shares as interest rates rise. Growth stocks, which are valued based on their future earnings, have borne the brunt of rising interest rates and declining valuations. This slide compares the valuation multiple investors assign to the estimated next 12-month earnings of the Nasdaq 100, which is viewed as a concentrated Growth index due to its Tech overweight. Note how the 10-year Treasury yield is inverted upside down on the right axis to demonstrate how higher interest rates correlate to a lower valuation multiple. The Nasdaq 100’s price-to-earnings multiple was 29.2x on 12/31/2021 when the 10-year Treasury yield was ~1.5%. As of 6/24/2022, the 10-year Treasury yield has risen to ~3.1% and the valuation multiple has dropped to 20.8x.
- Key Talking Points In keeping with the negative impact rising interest rates have on risk assets, this slide tracks the price of bitcoin in U.S. dollars. Bitcoin is a cryptocurrency that is used to facilitate transactions directly with another party, without an intermediary like a bank. It’s a relatively new asset that investors can invest in and traders can speculate on, and it is considered a riskier asset class. The chart shows bitcoin prices soared from ~$10,000 during October 2020 to ~$62,000 during April 2021. The price surge coincided with the Fed’s decision to cut interest rates to near 0% and purchase bonds, as well as Congress’s decision to issue multiple rounds of stimulus checks. The two measures flooded the financial system with liquidity and encouraged investors and traders to take on more risk to generate higher returns. Now that liquidity is being removed by the Fed as it raises interest rates and shrinks its balance sheet, bitcoin is crashing in tandem with risky assets. The chart shows bitcoin has plunged nearly -70% from ~$60,000 during November 2021 to ~$20,500 in late June 2022. Additional interest rate increases and diminishing liquidity could push bitcoin’s price lower from current levels.
- Key Talking Points This slide examines the impact rising interest rates have on the housing market. Starting with the upper left chart, the 30-year fixed mortgage rate has risen from 3.27% at the end of 2021 to 5.83% at the end of the second quarter, a +2.56% increase in 6 months. Moving clockwise to the upper right chart, data from the University of Michigan’s Consumer Sentiment Index shows an increasing number of respondents believe buying conditions for houses are worsening. The weakening homebuyer sentiment coincides with the surge in mortgage rates and soaring home prices. Moving clockwise to the lower right chart, data from the National Association of Realtors shows existing home sales continue to decline. Separate housing market data indicates the annualized pace of new housing starts and building permits for future building have both fallen more than -10% since the end of 2021. Moving clockwise to the final chart in the lower left, the last piece of the housing cycle equation – home prices. The chart tracks the Case Shiller Home Price Index and shows the surge in home prices during the past two years as the pandemic and low interest rates unleashed a wave of strong housing demand. As the housing market starts to cool, are home prices the next datapoint to drop?
- Key Talking Points This slide tracks year-over-year retail sales growth. The chart shows the surge in consumer spending during the pandemic as consumers spent less money on services and more money on goods. While year-over-year retail sales growth remains near the upper end of the last 20-year range, the chart shows growth has slowed considerably during the first half of 2022. The steep decline coincides with persistent inflation pressures and the Fed’s decision to raise interest rates. The downward trend suggests consumer demand is starting to soften. The box in the upper right corner of the chart tracks month-over-month retail sales growth across multiple categories during May. Month-over-month retail sales growth turned negative during May as retail sales contracted -0.3%. A look within the major categories shows consumers spent more at gas stations and grocery stores as gasoline and food prices rose and less on discretionary-related goods, such as autos and auto parts, electronics and appliances, and home furnishings. The data offers a near-term look at how high inflation is impacting and shifting consumer spending. It’s a concerning trend given consumer spending accounts for ~70% of the U.S. economy.
- Key Talking Points This slide compares bond yield movement across credit classes during the first half of 2022. The chart shows yields have risen sharply this year as the Federal Reserve has increased interest rates. One area of the credit market that has experienced pressure lately is high yield corporate and municipal bonds. The chart shows the spread between corporate investment grade and high yield bonds has risen to 4% (i.e., 8.8%-4.8%) at the end of the second quarter, up from 1.9% (i.e., 4.3%-2.4%) at the end of 2021. Likewise, the spread between municipal investment grade and high yield bonds has risen to 1.4% (i.e., 4.7%-3.3%) from 1% (i.e., 2.1%-1.1%) over the same period. Why does the wider spread matter? Credit spreads provide a barometer of risk sentiment and expected default risk. Bond investors are primarily focused on receiving interest payments and repayment of principal, while equity investors are more focused on the potential upside. The difference makes credit investors more cautious and suggests they are growing more concerned about credit and default risk in the coming quarters.
- Key Talking Points Soaring oil prices and the corresponding increase in gasoline prices have been another big theme this year. The two are a contributing factor to the current 40-year high inflation readings we are experiencing. Is there relief ahead? Historical data indicates perhaps. This slide charts the average price change of gasoline from January through December for all calendar years since 2000. It shows gasoline prices historically reach their peak each year during the summer months before steadily declining during the second half of the year. We suspect this is related to increased driving over the summer as more drivers hit the road for vacations. Regardless of the cause, the data is encouraging as it suggests we may see some much-needed relief at the pump this year. Before moving on to the next slide, we want to emphasize this is the average path gasoline prices take each year, which means this year could play out different. We will have to wait and see how the situation develops.
- Key Talking Points This slide takes another look at the potential for inflation relief in the coming months. The chart on the left compares year-over-year inflation growth against the last 12-month price change of the broad commodity index. To demonstrate the relationship between inflation and commodity prices, the last 12-month price change of commodities is advanced forward three months. The chart indicates commodity prices historically lead inflation, which is supported by the current environment (i.e., commodity prices are a significant contributing factor to current inflation pressures). Like the prior slide, the data indicates slowing commodity price appreciation could ease current inflation pressures. The question is how quick any potential relief could arrive. The chart on the right compares the growth in job openings against year-over-year inflation growth. To demonstrate the relationship between job openings and inflation, job openings growth is advanced by six months. The chart indicates an increase in job openings historically puts upward pressure on inflation, which syncs up with the tight labor market and resulting wage growth that has pushed inflation higher recently. This year has seen a steep drop in the growth rate of job openings, suggesting inflationary pressure from the labor market could also ease during the second half of 2022.
- Key Talking Points The final slide looks at corporate earnings estimates. The chart compares the ISM Manufacturing PMI, which is a monthly survey of purchasing managers at more than 300 manufacturing firms, against the last 3-month change in the S&P 500’s estimated next 12-month earnings. For reference, an ISM Manufacturing PMI reading above 50 signals a manufacturing expansion, while a reading below 50 points to a manufacturing contraction. What’s the takeaway? Corporate earnings estimates are historically revised lower as the ISM Manufacturing PMI declines. This is concerning given the ISM Manufacturing PMI’s current downward trend. Companies are scheduled to start reporting their second quarter 2022 earnings results in July. We will be watching the results and monitoring revisions to earnings estimates in the coming months.
- Closing Thoughts Thank you everyone for joining us today as we hope this webinar has been insightful into the market themes our team is following as we work hard to manage your family’s wealth alongside ours. Open your webinar to questions … OR End it with a call-to-action like below … For our current clients, you can always get in touch with the team by contacting ______ and we look forward to seeing you soon. For prospective clients that tuned in today, thank you for joining us. Please feel free to schedule time directly on our calendar to discuss your financial planning needs. We would love the opportunity to earn your business.