At the risk of sounding cliché, making the case for stocks to stage a second half rally back to the prior highs requires investors to see through some heavy cloud cover. If you prefer another market cliché, it’s times like these when investors need a crystal ball. We fully acknowledge how tough it is to see the bull case for stocks right now, and a retest of recent lows is certainly possible, but this week we lay out the bull case for the second half of the year. It starts with inflation.

The Wall of Worry Is Tall

Needless to say, it’s been a tough year. The S&P 500 Index started 2022 with its

The latest personal income and spending data from the Bureau of Economic Analysis show that part of the driver of spending growth in April was from savings. Another engine driving consumer spending was credit card usage but first, consider the savings rate.

Real consumer spending rose 0.7% in April, the fourth consecutive monthly increase in real spending.  The job market is tight, supporting consumer spending from gains in personal income, but the real cushion for consumers comes from excess savings accumulated during the pandemic. The savings rate in April fell to 4.4%, the lowest rate since 2008. But since the consumer is

Core bond investors have experienced the worst start to the year ever. However tough this year has been so far though (and it has been tough), the potential for future returns has improved meaningfully, in our view. Starting yields tend to be a good predictor of future returns and have become more attractive in a number of markets recently. With yields on most fixed income markets moving sharply higher, now could be a good time to revisit fixed income markets. 

Reasons to Own Core Bonds?

For us, the value proposition for core bonds (as defined by the bonds within the Bloomberg Aggregate Bond index) is that they tend to

First quarter earnings season was solid by just about any measure, but based on recent market behavior it’s obvious that in general market participants paid little attention. This is a macro-driven market, so it will likely take positive macro developments, i.e., better news on the inflation front, to turn stocks around. However, these results are impressive on their own and shouldn’t hurt the case for the bulls. The question is when will the micro stop getting drowned out by the macro. 

By The Numbers

In our earnings season preview, we expected a high single-digit increase in S&P 500 Index earnings for