State of the Market Update 

August 2022

This is Jon Maxson, CEO of Beacon Capital Management. I want to take a few minutes to reach out to our clients and give you a quick update on our perspective on the market.

We will continue to communicate with you, whether through webinars, emails, or videos to let you know what we see in the market, and what we’re focused on.

We’re here for you and encourage you to contact your advisor with any questions or concerns.

Please feel free to give your advisor a call: (615) 224-9794.

Are We in a Recession or Not?

To say that this has been a volatile year would be the understatement of the year. With the second quarter GDP numbers being negative, one of the biggest questions we are getting is, are we in a recession or not?

Well, if you go by the definition of a recession, we’ve now had two quarters of negative GDP—which would technically put us in a recession. Now, it’s a little bit of a mixed bag relative to the economy. We actually still have a very strong labor market, which is a good thing. Even in light of interest rates continuing to increase, the real estate market on the whole has maintained pretty steady growth. It has softened a little bit, but not like some experts would’ve expected, and we think that is a good thing.

How Much Longer Will Inflation be Elevated?

Still, in this market overall, the biggest overarching question is how much longer is inflation going to continue to be elevated? As you know, it’s at a 40-year high. We’re all feeling that at the pump and when we go to the grocery store to buy groceries for our families.

On the positive front, we’re starting to see oil come down and gas prices come down. I do think that is going to have an impact on inflation. Based on analysts that I study and some of the data that I’m looking at, my best guess is that inflation has probably peaked or is certainly close to peaking.

I don’t think it’s going to go back down to the Fed’s core objective of 2% before the end of the year. But I do think as we get into the third and fourth quarter, you’ll start to see that come down from the 9.1% reading that we got this last quarter. Again, this is something that we’re continuing to watch very, very closely.

The Inflation Reduction Act – Will it Actually Help Inflation or Not?

Last weekend, the Inflation Reduction Act was passed in the Senate. That now looks like that’s going to be going through. And I think the question with that bill is will that help inflation or will that add to that? The experts have said across the board that one of the things that comes along with that is about $450 billion in new taxes. That could potentially be a negative thing for corporations if they have to pass prices on to consumers, for example, but that’s something we’re going to be continuing to watch very, very closely as we get into the fall.

Again, as I said at the start of this video, technically if you go by the traditional, technical definition of a recession based on the July reading for the second quarter, we would now be technically in a recession. Now, if we’re technically in a recession, how long will that last? What does that look like? Well, of course, no one knows for sure. However, I can tell you that since World War II, the average recession has lasted about a year, some a little more, some a little less. If we go with the average and if we are by the technical definition of recession in a recession right now, we’re six months into that.

Market Volatility Moving Forward

We do expect some continued volatility in the market as we get into this fall. It has been good to see the last couple of weeks, the market bounce off its lows. But again, we do expect volatility in the market.

What I would say to folks is that you should have a:

  • good investment plan
  • good income plan using our philosophy of having some of your money principal protected
  • well-managed portfolio

We’re Here for You!

At Beacon, we understand this is an uncertain time, but we fundamentally believe in our country and in our markets—and over time we believe both will grow.

If you have questions about your portfolio or the risk that you’re seeing in the market and the economy and that’s causing some concern, as always, we’re here to serve you.

We want you to know that you can reach out to your advisor. This is a part of our duty to you. We’d be happy to have that conversation with you. But again, we’re very positive about the future. We do expect some volatility in the fall and are technically in a recession, but we will continue to monitor that and try to communicate with you as we go forward.

As always, just want to say thank you to all of you for your continued trust and Beacon and our firm. We don’t take that lightly and we absolutely wish you and your family the best as we continue to go through the rest of the summer and into the fall. Have a great day.

John Maxson, CEO, Senior Partner, Co-Owner

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