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4 Reasons to Be Bullish For the Second Half of 2022

May 17, 2022

It’s no secret that the first 4 months of 2022 has not been a good start for the market. You wouldn’t have to look very hard to find someone who has some sort of negative news to share. 

However, there are still some reasons to be bullish on the economy and stock market heading into the second half of 2022.

1. Resilient demand for products and services

Although we are seeing inflation numbers in the 8-8.5% range at the moment, we have seen resilient demand for both products and services. Meaning, even with higher prices, consumers have shown that they are still willing to go out and purchase these products and services. This has kept demand consistent so far this year. Consumer spending rose to 2.7% from 2.5% the previous month. Consumer spending accounts for a large percentage of the U.S. economy, roughly 70%, so a healthy consumer that is showing they are willing to spend money still is a good thing for the economy and stock market.

2. Healthy corporate and consumer financial positioning 

Corporations did incredibly well over the past couple years even with all of the uncertainty and hurdles. They have posted great earnings and have been able to position themselves well financially for a downturn because of this. 

Consumers, like corporations, also had a good couple of years and because of the circumstances we were able to save more cash than we have historically been able to. The personal savings rate shot up to between 18-30% during 2020 and stayed elevated in much of 2021 when the historical average is 8.97%. After a couple years of elevated savings, we are sitting on much more savings and cash as consumers than we have in the past. This puts us in a strong financial position to be able to weather inflation and a market sell-off like we are seeing.

3. Strong earnings and investments from companies 

The first quarter earnings of 2022 have been coming out over recent weeks. A large majority of these earnings are looking strong for companies which is a great thing. It shows us that through the first three months, while the markets were volatile, that companies were still able to perform well and meet their goals that they have set for themselves. Strong earnings shows a strong consumer and efficient company operations. Going into the rest of 2022 we will see how companies are able to leverage these promising earnings to keep momentum. 

Because their earnings have been good over the past couple years and beginning of 2022, companies have been able to invest heavily in their operations. They have been able to push towards more operations and technology advancements positioning themselves well from an operations standpoint for years to come. The more investments companies make on themselves shows their confidence moving forward which trickles its way throughout the entire economy. 

4. Low Unemployment and rising wages

There are roughly 1.9 jobs available for every worker looking for a job at the moment. The unemployment rate is 3.6% as of April 2022. Jobs are available for those who need and are searching for them and for those who are looking to change jobs their opportunities are endless. Low unemployment lends itself well to a strong consumer as we have money to spend and help the economy grow through our consumption of products and services. 

Additionally, we are seeing wage growth. From December of 2020 to the beginning of 2022 we saw a 4.5% growth in wages and salaries. While in the short term it may be hard to benefit from these increases because inflation is currently elevated, that won’t last forever. Wage inflation is much stickier than real inflation as it is very hard for companies to lower your wage as a worker so as inflation comes back down from its current levels we will start to be able to see the benefits from the wage growth we have had as of late.