top of page
Search

August Economic Update

  • Bob Lawson
  • Aug 9, 2022
  • 3 min read

Market Summary

The stock market shrugged off economic data to retrace higher in July for a much-needed rebound from the recent lows. The Dow Jones Industrial Average gained 6.73%, while the S&P 500 rose 9.11%, and the tech-heavy Nasdaq 100 Composite led the pack picking up 12.35%. (1)

Economic Developments Last Month

With stocks have been under pressure all year from rising inflation and slowing economic growth, there were not many signs in July that suggested either inflation had cooled or that the economy was rebounding. The month of July culminated with corporate earnings from the largest technology companies, a Fed interest rate decision, and the release of an initial estimate for second quarter GDP.


During the course of this year, inflation and rising interest rates have been center stage for the pressures weighing on the market. On July 13th, the latest CPI numbers were released showing inflation continuing to rise with prices increasing 9.1% year-over-year, which is the highest inflation increase since November 1981. Near the end of last month, another inflation metric known as Personal Consumption Expenditures (PCE) was released, which hit a new high for the year rising 6.8%. (2,3)


In light of this data, on July 27th, the Federal Reserve announced another 0.75% interest rate increase, the second in a row after raising the same amount in June. Fed Chair Jerome Powell also announced they would no longer be giving forward guidance for future interest rate hikes and will be completely data-dependent moving forward. Given the rate of change with inflation has continued to remain persistently high, the Federal Reserve has signaled another aggressive interest rate increase is likely in September (no meetings are scheduled for August). (4)


Looking Ahead…

Last month’s rebound in the stock market was a welcomed relief for investors. However, it is important to maintain perspective. Inflation has remained persistently high, and the Federal Reserve is committed to raising interest rates into the foreseeable future to dampen growth and demand.


Additionally, the U.S. GDP report was released last month which showed a second consecutive contraction in growth, which officially places the U.S. into a “technical” recession. As mentioned in last month’s newsletter, this is a “hindsight” indicator since the contraction in growth has already occurred. We could be nearing an equilibrium point where the market has already priced-in this contraction. On the other hand, if inflation does not relent in the coming months, it will force the Fed to keep raising interest rates at an aggressive pace which would further hamper growth into next year.


The recent retracement of the market drops in June should be viewed through a cautionary perspective as there has been little change from a macro economic standpoint at this time. The same economic pressures that have impeded the stock market this year continue to persist. The counter-intuitive move last month with decelerating growth and deteriorating economic conditions poses the question whether this was temporary counter-trend rally, similar to the moves seen in March this year. While we hope that is not the case, it is our job to analyze market moves relative to current risks. When inconsistencies present themselves, it is prudent to ask these types of questions based upon the data at hand


August through October will be a pivotal period for the market and will shape the course for the remainder of the year. We will be looking for confirmation signals the worst could be behind us, or signals which imply there may be a re-test of the recent lows due to slowing growth and interest rate pressures.


 

Monthly Financial Tip:

Calculate your total net worth on an annual basis. It can help keep you apprised of the progress you are making toward your financial goals.

 

Citations:

1. WSJ.com, July 31, 2022

2. Investing.com, July 13, 2022

3. Investing.com, July 29, 2022

4. CNBC.com, July 27, 2022


Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.



 
 
 

Comments


Financial Plan | Personalized Report | Financial Advisor - Minneapolis

Barrington's Financial Blog

MRFC - PHOTOSHOP 151x104.png

About   |    Our Services   |    Financial Planning   |    Employer Retirement Plans   |    Contact

Litigation Support   |    Expert Witness   |    Pro Bono Services   |    Careers       

Barrington Capital Management, Inc.

3800 American Blvd West   |   Suite 1500

Bloomington, MN  55431

952-835-1000   |    800-741-0704   

Info@BarringtonCap.com

 

Barrington Capital Management, Inc. only conducts business in states and jurisdictions where it is registered or where an exemption from registration exists. This site and its contents do not constitute investment advice or a solicitation to sell securities. Past performance is not indicative of future results. This website is for informational purposes only and Barrington Capital Management, Inc. reserves the right to modify it at any time without notice. Copies of Barrington Capital Management Inc.’s Form ADV Part 2 are available upon request. Images and photographs are included for the sole purpose of visually enhancing the website. No photographs are of current or former clients and they should not be construed as an endorsement or testimonial from any of the persons in the photograph.

All materials used on this site, including all images, are copyrighted and are protected worldwide by copyright laws and treaty provisions. They may not be copied, reproduced, modified, published, uploaded, posted, transmitted, or distributed in any way, without Barrington Capital Management Inc.'s prior written permission.

Neither Barrington Capital Management, Inc., nor any of their Investment Adviser Representatives, provide tax or legal advice. Tax and legal advice should only be obtained from a qualified professional. All written content on this site is for informational purposes only. All information and ideas should be discussed in detail with an advisor prior to implementation. Examples from our news feeds, blogs or articles do not take into consideration commissions, investment management fees, miscellaneous transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. Investors should review transaction costs, margin requirements and tax considerations with their financial or tax advisor before entering into any investment or financial planning strategy. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness.

Investment Advisory services are offered by Barrington Capital Management, Inc., a Registered Investment Adviser in the state of Minnesota. Barrington Capital Management, Inc. may utilize the services of First Ascent Asset Management, LLC for certain investment portfolios. Insurance products and services are also offered through Barrington Capital Management, Inc., a licensed insurance agency. 

Disclosure: Barrington Capital Management, Inc. is not a law firm. Robert D. Lawson and his associates are not practicing attorneys. The scope of any activities performed by Robert D. Lawson, subcontractors or employees of Barrington Capital Management, Inc. is limited to litigation consulting and litigation support. 

By using this website, you agree to our Terms of Service and Privacy Policy. View our Business Continuity Plan.

Copyright © 2025 Barrington Capital Management, Inc.

A Registered Investment Adviser  |  All Rights Reserved

 

bottom of page