Weekly Newsletter

Portfolio Advisory Council, LLC presents:

June 27, 2022

THE WEEKLY ECONOMIC

UPDATE

THIS WEEK IN HISTORY

June 1, 1862

President Abraham Lincoln signed the first income tax bill, levying a 3% income tax on annual income of $600-$10,000 and a 5% tax on incomes over $10,000. Also on this day, the Bureau of Internal Revenue was established by an Act of Congress.

QUOTE OF THE WEEK

"The philosophy of the school room in one generation will be the philosophy of government in the next."

"Most folks are as happy as they make up their minds to be."

~ ABRAHAM LINCOLN

A MESSAGE FROM PHIL

June has been another lousy month in a lousy year for financial markets. Every sector of the S&P is currently down for the month of June. Even energy stocks are off from their peak. Though generally considered safer than stocks, bonds are down over 10% in 2022.

The primary drivers behind the turmoil have been inflation and the accompanying interest rate hikes. Markets have adjusted to this reality as the growth rate of the economy has slowed.

So where are financial markets headed? We think the inflation rate has already peaked and will continue to decline. Many commodities have already come down in price. The housing market will cool as higher mortgage rates take hold.

We believe financial markets are about back to fair value. Stock markets may continue to drop, but we do not think it will be significant. If you could fast forward one year, you will find financial markets have improved.

The first half of 2022 has been terribly difficult. Please hang on! Thank you for your patience and contact us if you have any questions.

THE WEEK ON WALL STREET

Prospects of cooling inflation powered a rally in stock prices last week despite growing recession concerns.

The Dow Jones Industrial Average gained 5.39%, while the Standard & Poor’s 500 climbed 6.45%. The Nasdaq Composite index rose 7.49% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged 0.78% higher.^1,2,3

STOCKS BOUNCE

Declining energy and food prices and falling bond yields signaled a potentially improving inflation outlook, buoying investor sentiment. The rally in stocks was most powerful on the first and final trading days of a holiday-shortened week. Stocks turned a bit choppy mid-week as investors digested Fed Chair Jerome Powell’s Senate appearance but resumed their momentum on Thursday and rallied Friday as rate-hike expectations eased.

Though the weekly gain was a welcome respite from the market’s downward trend, declining bond yields and falling food and energy prices can also be interpreted as signs of slowing economic growth, which may represent a headwind for corporate earnings in the months ahead.

POWELL TESTIFIES

Fed Chair Jerome Powell told members of the Senate Finance Committee that the Fed is committed to lowering inflation and moving quickly to do so. He conceded that a recession could result from the Fed’s inflation-fighting efforts and acknowledged that some of the forces driving inflation (e.g., supply chain, war) are out of the Fed’s control.⁴

Perhaps the most exciting part of his testimony was what he didn’t say, which was a definitive statement on future hikes. Instead, Powell told lawmakers that he “anticipate[s] that ongoing rate increases will be appropriate.” Before his testimony, the Fed published a new research paper that found a greater than 50% chance of recession in the next four quarters.⁵

BY THE NUMBER$

ALL IN THE SAME BOAT - As of 6/16/2022, central banks in 45 nations globally have raised interest rates in an effort to bring down the spending demand of consumers in their respective countries. The Federal Reserve has raised rates 3 times this year, most recently on Wednesday 6/15/2022. The Fed funds rate is 1.75% today. (source: FactSet).

TRAVELING OVERSEAS - The US dollar has risen in value vs. foreign currencies this year. E.g., 1,000 Euros cost $1,056 last Friday 6/24/2022. 1,000 Euros cost $1,193 on 6/24/2021 or a year ago (source: BTN Research).

FLY AWAY - 2.43 million people went through TSA screening last Thursday 6/23/2022, quadrupled the 623,624 that did so 2 years earlier on 6/23/2020 (source: Transportation Security Administration). 6

THE WEEK AHEAD: KEY ECONOMIC DATA

Monday: Durable Goods Orders.

Tuesday: Consumer Confidence.

Wednesday: Gross Domestic Product (Third Estimate for Q1).

Thursday: Jobless Claims.

Friday: Institute for Supply Management (ISM) Manufacturing Index.

Source: Econoday, June 24, 2022

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Wednesday: General Mills, Inc. (GIS).

Thursday: Micron Technology, Inc. (MU), Constellation Brands, Inc. (STZ), Walgreens Boots Alliance, Inc. (WBA).

Source: Zacks, June 24, 2022

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

THE WEEKLY RIDDLE

In a drawer are six pairs of red socks, four pairs of white socks and five pairs of blue socks. In total darkness, how many socks would you have to grab to be certain you had a matching pair?

LAST WEEK’S RIDDLE: It has 18 legs, is uniformed, walks and runs on grass and artificial turf, and catches flies. What is it?

ANSWER: A baseball team.

Portfolio Advisory Council, LLC

A Registered Investment Advisory Since 1986

Investment advisory services offered through Portfolio Advisory Council, LLC, and an SEC Registered Investment Adviser.

We cannot accept trade orders through e-mail. Important letters, e-mail, or fax messages should be confirmed by calling 713.574.6015. This email service may not be monitored every day, or after normal business hours.

James W. Hamilton, CFS, AIF

713.574.6025

W. Thomas Sutton CFP(R), ChFC, CLU

713.574.6020

Philip B. Moran, MBA, ChFC, CFP(R), AIF

713.574.6030

John C. Husbands

Visit us at www.pac1000.com

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

CITATIONS:

1. The Wall Street Journal, June 24, 2022

2. The Wall Street Journal, June 24, 2022

3. The Wall Street Journal, June 24, 2022

4. The Wall Street Journal, June 22, 2022

5. The Wall Street Journal, June 22, 2022