This Weekly Financial Markets Update reviews the top market headlines: U.S. GDP Contracts for Second Straight Quarter, Fed Hikes Policy Rate by Another Three-Quarters of a Point, Consumer Sentiment Remains near Historic Low in July

Top Three Market Headlines

U.S. GDP Contracts for Second Straight Quarter: The Bureau of Economic Analysis reported last week that U.S. gross domestic product ("GDP"), a measure of all goods and services produced, declined by a seasonally-adjusted annual rate of 0.9% in Q2 of 2022. After falling 1.6% in Q1, U.S. GDP has now contracted for two straight quarters, which meets the traditional definition of a recession. Key factors driving the Q2 drop included decreases in business inventories, residential investments, and government spending. The report also indicated that consumers' expenditures of goods declined at a 4.4% rate, though spending on services (e.g., foods services, accommodations, health care) rebounded at a 4.1% pace.

Fed Hikes Policy Rate by Another Three-Quarters of a Point: The Federal Reserve raised its benchmark short-term interest rate (the federal-funds rate) by three-quarters of a percentage point last week, lifting the target range for the policy rate to 2.25% - 2.50%. This marked the Fed's fourth rate increase, including the second straight 3/4-point hike, since March of this year as the central bank unwinds its post-pandemic easy-money policies to combat stubbornly high inflation. Fed Chairman Jerome Powell signaled that additional rate hikes are likely this year, but didn't offer specifics on the pace of such, noting that decisions going forward will depend on incoming data on inflation and the outlook for the economy.

Consumer Sentiment Remains near Historic Low in July: After plunging significantly over the prior two months, the Index of Consumer Sentiment published by the University of Michigan registered a 51.5 reading in July, little changed from its record low of 50 posted in June. The index is based on surveys of consumers regarding their outlook on the U.S. economy. The June report highlighted that inflation remains at the forefront of consumers' attention, as they expect costs to rise 5.2% over the next year. Moreover, according to the report, consumers' labor market expectations softened in July.

As of August 01, 2022 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 3.27% 6.98% -14.61% -11.15%
S&P 500 4.28% 9.22% -12.58% -5.15%
Russell 2000 4.35% 10.44% -15.43% -14.82%
MSCI EAFE 2.11% 4.98% -15.56% -15.08%
MSCI Emerging Markets 0.41% -0.25% -17.83% -21.17%
FTSE NAREIT 5.00% 9.06% -12.97% -2.22%
Bloomberg Commodity 4.60% 4.26% 23.49% 25.62%
Barclays U.S. Aggregate 0.64% 2.44% -8.16% -8.98%

Bloomberg 7/29/2022, Univ. of Michigan Surveys of Consumers 7/29/2022, WSJ 7/28/2022, Bureau of Economic Analysis 7/28/2022, WSJ 7/28/2022. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Gallagher Fiduciary Advisors, LLC ("GFA") is an SEC Registered Investment Adviser that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Securities may be offered through Triad Advisors, LLC ("Triad"), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad, Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.