So How Did We Do in July?

August 2, 2022
So How Did We Do in July?
Federal Reserve .75% increase of short-term interest rate right on the target as expected by the markets.

At the beginning of the month, we promised plenty of fireworks – after the 4th of July. It was certainly a busy month of events and economic data. And that does not even include baseball’s All-Star game or the continuing war in Ukraine, which has turned into a battle of attrition. So how did this busy month turn out? We started with a solid jobs report. Though this report allayed fears that a recession was around the corner, it did not assuage fears of a recession or economic slowdown further down the road.

These fears continued to be flamed by continued hot inflation data release in mid-June. This increased speculation of another large increase by the Fed, who was scheduled to meet as the month came to a close. Even before the Fed was to meet, earnings reports started flowing for the second quarter, another economic barometer. The season started with a bang with a major bank missing projected earnings and warning of -- you guess it – a recession.

The Fed meeting was not a guess if they were to raise rates, but how much they will raise rates. Estimates were ranging from .50% to .75%, but stretched to 1.00% after the inflation reports were released. The .75% increase turned out to be right on the target as expected by the markets. We finished the month with the first estimate of economic growth for the second quarter. The decline of 0.9% was the second quarter of negative growth in a row, clearly an indicator of an economic slowdown. This may give the Fed some reason to think harder regarding additional significant rate increases.