Market Update | June 2022
The markets have experienced increased selling pressure over the past week, officially pushing the S&P 500 into bear market  territory. Below, BayBridge Capital Group’s Chartered Financial Analyst consultant, Jim Worden shares analysis of current market conditions as well as our investment outlook.
Over the course of the past several days, both equity and fixed-income markets have experienced increased volatility that is largely attributable to higher-than-expected inflation, as well as concerns over how the Federal Reserve will counteract it.
Concern over the pace of interest rate hikes from the Federal Reserve’s ‘Federal Open Market Committee’ (FOMC) has pushed bond prices much higher – with the 10-year US Treasury trading at 3.32% as of this update (as little as two weeks ago, it was trading at 2.74%). Because rates have risen this significantly in such a short period of time, investors have experienced higher volatility within the equity markets over revenue and margin concerns – particularly within growth-related equities with little or no dividends, and those with negative earnings growth.
Investor anxiety and apprehension during times of volatility is normal – however, it is important to keep in mind that it is also normal for equities to have multiple drawdowns within a given year. A central consideration is that markets are largely a leading indicator to the economy  – so, while we may not learn whether we are in a recession until later, the markets have already begun to ‘price in’ the deciding factors.
If/when the Federal Reserve recognizes an official recession, that will likely result in easing monetary policy by reducing rate increases and purchasing longer-term fixed income assets. Since unemployment tends to increase through recessions (which could then cause a pull back on demand), this shift may result in receding inflationary pressures. Once inflationary pressures have receded and the FOMC takes a more accommodative stance, the markets would likely shift focus back to the increasing likelihood of enhanced future earnings, thus entering a new economic cycle.
BayBridge Capital Group remains committed to a philosophy that times of heightened volatility are not optimal for making major investment decisions. Time-tested investing principles such as buying low and selling high, rebalancing, and dollar-cost averaging are prudent approaches for staying invested and avoiding the trap of reactionary or fear-driven trading. Investors who stay disciplined and invest throughout the ups and the downs perform far better overall than those who speculate about peaks and troughs, or those who ‘buy in’ and ‘get out’ based on emotion.
Our team is committed to our fiduciary  role and will continue to work relentlessly to protect your financial best interests while navigating the complexities of market cycles.
If you would like to schedule a consultation with a BayBridge Capital Group advisor, then please email [email protected].
BayBridge Financial Analyst Consultant,
Jim Worden (CFA®, CMT®, CAIA®)
The Wealth Consulting Group
Quick Reference: Definition of Terms
 What is a bear market?
 What is the stock market vs. the economy?
A stock market is where the buying and selling of stocks takes place. Each market has an index: a group of stocks that are selected to represent overall performance of that market. For example, S&P 500 is an index comprised of 500 large companies that trade on U.S. exchanges. Their performance is viewed as representative of the entire U.S. equity market, with many of these companies operating on a global scale, including Microsoft, Walmart, Starbucks and Amazon.
The economy is the sum of all the activities that go into making and spending money within a region or country. In the headlines, the economy is often measured and tracked through changes in Gross Domestic Product (GDP). Employment levels, the housing market, consumer confidence, and spending are other ways to measure the strength of the economy.