Vestbridge Weekly Update

Week Ending August 5, 2022

Weekly Market Commentary

How is Inflation affecting your Retirement?

On an individual level, the inflation rate affects how much your retirement dollars will be worth. Over time, inflation can devalue your savings and income. Understanding how inflation may hurt your retirement strategy is a must for ensuring that you have enough assets to last through your later years.

Inflation has a direct impact on the revenue, savings, and spending of all consumers, including retirees. The primary concern for retirees is how inflation affects how they can spend their money on important necessities such as healthcare, travel, and leisure.

Retirees can diversify their revenue streams, allocate their savings wisely, and make mindful spending choices to protect against rising costs. Understanding inflation helps you use market changes to your advantage to produce positive outcomes. If you would like more information on inflation and retirement, please call us today at 833-592-5252.

Weekly Market Summary

Global Equities:   Following a huge week of earnings and the Fed meeting, investors needed a bit of a breather, and markets were relatively quiet as investors tried to figure out what comes next with the Federal Reserve on break until its next scheduled meeting in September. The S&P 500 finished the week up 0.4%, while the Nasdaq outperformed with a 2.2% weekly gain, and the Dow Jones Industrial Average posted a slight weekly loss of -0.1%. Investors were feeling a bit more “risk-on” until the Friday jobs report, which was stronger than expected and raised the likelihood that the Fed will keep the hawkish pressure on rates come September. Developed International stocks were down -1.1% and Emerging Markets managed just a 0.3% gain as the continued strength of the US dollar limited the appeal of foreign investments.

Fixed Income: 10-Year Treasury yields flirted with the 2.5% level, before rising back to 2.8% to close out the week. The yield curve inversion has increased, however, with the 2-Year Treasury at 3.2% now out-yielding the 10-Year by 40 basis points, a reflection of investor uncertainty surrounding the potential for recession. High yield bonds continued their recent upward trend, managing to gain 0.2% during the week.

Commodities: Oil prices plunged to under $90 for the first time since early February, thanks to the release of oil from the strategic oil reserve as well as behavioral changes as consumers cut back on driving amidst growing recession concerns. Gold prices, which have failed to hedge against inflation, hit a one-month high on concerns over US-China tensions, ending the week just under $1,800/oz.

Weekly Economic Summary

June Jobs Surge: The July jobs report showed monthly growth of 528,000 jobs, more than double the 250,000 expected by economists. Unemployment also unexpectedly ticked down to 3.5%, from 3.6% in June. Average hourly earnings were up 0.5% month-on-month and 5.2% year-on-year, also higher than anticipated. The robust job and wage growth puts more inflationary pressure on the economy, and bolstered expectations that the Fed may implement a third consecutive 0.75% rate hike in September.

Mortgage Rates Dip: Mortgage rates exceeding 6% threatened to kill the red-hot housing market, however with the growing concerns over recession, rates have quickly fallen back to earth, dipping below 5% this week. The plunge in rates lured in some opportunistic buyers, with weekly mortgage applications up 1.2% after several weeks of declines. Refinancing activity was up 1.5% during the week.

Earnings Update: Earnings from big tech held up during the prior week, and this week was relatively light on major market-moving news. PayPal (PYPL) shares jumped as Elliott Management took a $2 billion stake in the payment-processing company, which had fallen as much as 77% from its 2021 peak. Rival payment-processer Block, Inc. (parent of Square, SQ) posted profit growth of 29% year-on-year, although its Bitcoin bet has fallen flat, with revenue from Bitcoin trading declining 34%.

Chart of the Week

Our Chart of the Week is the iShares MSCI Emerging Markets ETF (ticker EEM), plotted against its 50 (blue line) and 200-day (red line) moving averages. While domestic indices have managed to get upside the 50-day resistance and are flirting with a retest of the 200-day level, Emerging Markets have been trading sideways since mid-June and remain down over 17% year-to-date. The biggest headwind Emerging Markets currently face is the strength of the US Dollar, which makes foreign investments less attractive. High inflation and supply chain issues are also limiting upside; however, Emerging Markets stocks are incredibly cheap at just 11 times forward earnings and could rip higher quickly if the US dollar weakens measurably.

Chart courtesy Commentary by Vestbridge Advisors, Inc.

Disclosure: Vestbridge Advisors, Inc. (“VB”) Is registered with the US Securities and Exchange Commission as a registered investment advisor with principal offices at 3393 Bargaintown Road, Egg Harbor Township, NJ. The information contained in this publication is meant for informational purposes only and does not constitute a direct offer to any individual or entity for the sale of securities or advisory services. Advisory advice is provided to individuals and entities in those states in which VB is authorized to do business. For more detailed information on VB, please visit our website at www.Vestbridge. com and view our Privacy Policy and our ADV2 Disclosure Document that contains relevant information about VB. Although VB is a new organization, any references herein to the experience of the firm and its staff relates to prior experience with affiliated and nonaffiliated entities in similar investment-related activities. All statistical information contained herein was believed to be the most current available at the time of the publishing of this publication.

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