MOST AMERICANS ARE CONTINUING TO DO WELL, SO FAR.:  U.S. investors are being hit by large tax payments owed on capital gains from 2021, falling asset values so far this year, and lower cash distributions from interest and dividends.  But American consumers continue to spend at levels appropriate for a healthy economy, so far.  Before the pandemic, consumer spending increased 2.5% per year on average. Currently, despite the pandemic, the total amount of spending is not much under where it would have been without a pandemic.  It is currently a different mix of spending.  Price-adjusted spending on groceries and durable goods (cars, appliances, furniture, exercise equipment, televisions, etc.) remains elevated, while real spending on consumer services such as movie theaters and dental visits remains depressed. Americans earned about $155 billion more in May 2022 than they did in January 2020 on a seasonally-adjusted basis. The single biggest reason is that worker pay is up by 16%. Higher income for small business owners and the self-employed, as well as higher spending on the recipients of Social Security, Medicaid, Medicare, and Veterans’ benefits have also contributed. Taxes have grown rapidly, however, eating into those gains, while dividends and interest income have been stagnant. Payroll taxes have gone up with income. Capital gains taxes are being paid this year on last year’s gains which include the gains on the speculative “meme” stocks and cryptocurrency.  Thus, the wealthy who live off their investments are seeing their income and spending power decrease while most working Americans, so far, have kept pace.  Despite this, consumer confidence surveys are plummeting, and the obvious culprit is inflation.  Most Americans have kept up so far, but are worried about the future.  If the worries continue, the spending will stop keeping up, and the economy will come under pressure.

BAD HALF:  The S&P 500 just experienced its worst first six months since 1970 finishing on Thursday down 21% for the year so far.  Lower stock prices are primarily being caused by investor fear of recession being caused by central banks raising rates to fight inflation.  According to a recent survey by Deutsche Bank, 90% of investors expect the U.S. to go into a recession before the end of 2023.  72% of investors believe the S&P will go down more before a sustained recovery.  The second half of the year started on Friday and it was positive for stock markets as we got a little bounce.

LONGER-TERM PERFORMANCE:  Below are the annualized three-year and five-year numbers for these same indices.  

U.S. VEHICLE SALES INCREASING: Sales of automobiles in the U.S. increased 2.5% in June from the prior month. This is 16% lower than June of 2021. COVID had a significantly negative impact on this market, and April 2020 turned out to be the worst month.  After April 2020, sales increased, and were close to sales in 2019. However, sales decreased late last year because of supply chain issues.  That decrease seems to have bottomed in September of 2021. 

RENTS RISE, BUT RATE OF INCREASE MAY HAVE PEAKED:  Overall average rents in the U.S. rose by 1.3% over the course of June, consistent with last month’s increase. So far this year, rents are growing more slowly than they did in 2021, but faster than they did in the years immediately preceding the pandemic. Over the first half of 2022, rents have increased by a total of 5.4%, compared to an increase of 8.8% over the same months of 2021. Year-over-year rent growth currently stands at 14.1%, but has been trending down from a peak of 17.8% at the start of the year.

MEANWHILE IN EUROPE:  In the European Union, consumer prices were 8.6% higher than a year earlier, an increase from the 8.1% rate of inflation recorded in May and the highest since they began keeping records in early 1997.

IF THE POOR WERE NEXT DOOR:  Gret Glyer was a heartwarming story.  He graduated from college in 2012 and went to work for Enterprise Rent-A-Car.  The following year he went to Malawi in Africa to teach at the African Bible College where he spent the next three years. After witnessing extreme poverty during his time abroad, he decided to dedicate his career to “eliminating it and helping those in need.” He started a non-profit called DonorSee to make it easier for those who want to give to those in need throughout the world..  He has helped raise money to build houses for widows and orphans, and launch a girls’ school in Malawi.  He wrote a book called “If the Poor Were Next Door.”  He married a childhood friend and college classmate in 2018, and they have two young children.  This past week we first heard through clients who are friends that he was murdered in his home.  The story is now all over the news. It is a gut wrenching example of how wrong life can go at times on this planet. I plan on purchasing his book and reading it in the near future, and praying for his wife and two young children, and the nonprofit he started.

ANNIVERSARY:  Okay, so it is another year, and another anniversary.  This year we are celebrating at a place where this is our nighttime view.  I’ll take it.  Happy anniversary to us!

Have a great week!

“I have now reigned above 50 years in victory or peace; beloved by my subjects, dreaded by my enemies, and respected by my allies.  Riches and honors, power and pleasure, have waited on my call, nor does any earthly blessing appear to have been wanting to my felicity.  I have diligently numbered the days of pure and genuine happiness which have fallen to my lot;  They amount to 14.”  Abd al-Rahman III, emir and caliph of Cordoba in the tenth century Spain, and absolute ruler who lived in complete luxury.

“Those who are at ease have contempt for misfortune.”  Job 12:5

SOURCES: 
BAD HALF wsj.com/articles/global-stocks-markets-dow-update-06-30-2022-11656487667-11656574533?mod=article_inline AND wsj.com/articles/global-stocks-markets-dow-update-07-01-2022-11656660859?mod=markets_lead_pos1
MOST AMERICANS ARE CONTINUING TO DO WELL, SO FAR.: theovershoot.co/p/most-americans-are-doing-well-for
U.S. VEHICLE SALES INCREASING: wardsintelligence.informa.com/WI966534/June-US-LightVehicle-Sales-Continue-Mays-Weakness
MEANWHILE IN EUROPE: wsj.com/articles/eurozone-inflation-hits-new-high-pressuring-ecb-to-raise-key-rate-more-forcefully-11656689086
IF THE POOR WERE NEXT DOOR:  tributearchive.com/obituaries/25236605/gret-novillo-glyer 
 

(c) 2022 Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets. 
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States. 
*Bloomberg Barclays U.S. Aggregate: This is a measure of the U.S. bond markets.