Brian Jacobsen provides perspective on key events and topics for the week of June 25–July 1, 2022, and his thoughts about what the week ahead may hold. Plus: There’s a recap of the second quarter’s key events.

The week that was

  • This past quarter it seemed like there was nowhere to hide: Stocks were down, bonds were down, and even commodities—except energy—were down. Sitting in cash may have felt safe, but after accounting for inflation, even cash was down. Sticky inflation, slowing growth, and geopolitical issues have been a toxic mix for markets. There are few, if any, upsides to down markets, but markets are forward looking, and investors need to think about positioning portfolios for what lies ahead and not for what lies behind. For that, take a look at our 2022 Mid-Year Outlook: Rolling With Change.


  • China cut its quarantine period for visitors from three weeks to 10 days.
  • U.S. consumer confidence in June fell to its lowest level since February 2021, according to the Conference Board Consumer Confidence Index. The weakness was a result of worries about inflation.
  • According to purchasing manager surveys, China’s manufacturing and services sector growth increased in June as Shanghai reopened.
  • U.S. disposable personal income rose 0.5% month over month in May, but after adjusting for inflation, disposable income fell 0.1%. Personal consumption expenditures rose 0.2% in May, but in real terms—after adjusting for inflation—spending fell 0.4%. Inflation, according to the personal consumption data, was 0.6% month over month in May and 6.3% year over year.


  • Russia/Ukraine update:
    • Russia defaulted on its dollar-denominated debt. This was its first default on dollar-denominated debt since 1917. Russia did default on local currency debt in 1998. Sanctions have blocked Russia’s ability to complete its payments, so Russia is arguing that it has made payment even if the bond holders didn’t receive the money.
    • Russia bombed Kiev, Ukraine’s capital, on the eve of a G-7 meeting (a gathering of representatives from a group of seven advanced economies). The attack’s timing makes it look like it was to send a message to the West. Russia also used precision-guided missiles to attack a shopping mall.
    • Russia withdrew troops from Snake Island, a small island in the Black Sea. Russia’s defense minister claims it is a “symbol of goodwill.” Ukraine’s forces attacked the island with missiles and artillery, forcing Russia to withdraw. The island was used by Russia as a launching point for attacks and a way for Russia to monitor and block Ukraine’s ports.
    • At the G-7 meeting, leaders agreed to ban gold imports from Russia and to put a price cap on oil exports from Russia.
    • Turkey agreed to support Finland’s and Sweden’s applications to join NATO.
  • G-7 officials discussed the possibility of an Iranian nuclear deal that would also allow Iran to export oil.
  • First Minister of Scotland Nicola Sturgeon said she will push ahead with an independence referendum next year.
  • Environmental ministers from the European Union agreed on a framework to eliminate carbon emissions from new vehicles by 2035. Next, the European Parliament will take up the issue.

 The week to come

  • The big data release for the week will be Friday’s Employment Situation report for June. Earlier in the week, we’ll get the minutes from the May Federal Open Market Committee (FOMC) meeting. We’ll scour it for hints as to how strongly the committee feels about hiking another 75 basis points (bps; 100 bps equal 1.00%) in July.
  • The Reserve Bank of Australia has a policy meeting on Monday. China’s June inflation data come out on Friday.

The quarter that was

  • Russia shifted its focus to be a land grab in eastern Ukraine. China shut down Shanghai, and then it reopened. OPEC increased its oil output. The Federal Reserve (Fed) went big with its rate hikes. The European Central Bank (ECB) teed up rate hikes and said it has a tool to help keep peripheral spreads from blowing out. Retail sales and industrial production growth went negative. Housing activity fell off a cliff. And inflation was hot, hot, hot (and remains so). It was a busy quarter!
  • Earnings reporting season went out with a bang as some big retailers gave rather dour forecasts. Retailers have restocked their inventories, but they may have misjudged exactly what type of inventory to stock. At the index level, earnings for companies within the S&P 500 Index grew at a 9.12% year-over-year rate while sales grew at a 13.59% pace.
  • Inflation was hot, hot, hot in May. The headline year-over-year rate hit a new high of 8.6%. Core inflation (excluding food and energy) was 6.0% year over year. Despite nearly two job openings per unemployed person and an unemployment rate of 3.6%, hourly earnings failed to keep up with inflation. In May, average hourly earnings rose 5.2% year over year.
  • U.S. retail sales fell in May as spending on big-ticket items declined while gasoline spending rose. Tighter financial conditions hurt spending on things that need to be financed, but high gasoline prices can also be a drag as consumers wait to spend on high-priced items in favor of filling the tank.
  • The FOMC hiked its target for the federal funds rate by a total of 125 bps in the second quarter with 75 bps of that occurring in June. Including the March hike of 25 bps brings the upper band of the federal funds rate target to 175 bps. Fed officials expect the federal funds rate to be at 3.4% by the end of the year. During his semiannual testimony before congress, markets seemed to react favorably to Fed Chair Powell’s statement that if the growth data slows too fast, while the Fed won’t cut rates—unless inflation is also falling—it will at least consider a pause.
  • China’s government imposed a shutdown on Shanghai over the spread of COVID-19. It reopened in early June. China’s data has been very weak. Premier Li Keqiangi ordered officials to take action against a “complicated and grim” employment situation. President Xi Jinping pledged to provide fiscal stimulus to help the country reach its growth targets.
  • The Bank of Japan (BOJ) intervened in the Japanese Government Bond (JGB) market. The BOJ has been practicing “yield curve control,” and the 10-year and longer portion of the yield curve has gotten a little out of control. The BOJ seems willing and able to purchase unlimited JGBs to push yields lower. Unlike most other developed market central banks, the BOJ is pledging to keep monetary policy easy.
  • The ECB said it intends to end its asset purchases on July 1 and to raise its policy rates by 25 bps in July with another 25 bps hike in September likely. However, if inflation is persistent, then it could contemplate a larger hike in September.

Thanks for reading, stay informed!


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