Our July 2022 stock and ETF watchlist with entry points, sector analysis, and market outlook.
Market Overview
To start off, the month of June was painful again for investors. But personally my mind was elsewhere for the majority of that month. My wife and I welcomed our first child into the world! It was a great experience and we are extremely happy to become parents! I will be posting information about how to set up investments for your child, keep an eye out! Now on to the recap of last month.
Fed & Monetary Policy
For the month of June we saw all the indexes (Dow Jones, S&P 500, NASDAQ, & the Russell 2000) all hit 52-week lows, AGAIN. One wrinkle of good news, if you want to call it that, is that the Fed raised interest rates by 75bps this past meeting. Plenty of analysts have their opinions about this move. Some feel like 50bps would've sufficed, others are more than happy with 75bps, and there are a few that feel like the Fed isn't being aggressive enough. If you weren't able to catch Jerome Powell testifying to Congress on 06/23/22 I highly suggest tapping into it. Plenty was said about inflation and the state of our economy. One thing I did take away was that some of the Congressmen and Congresswomen did mention that there is inflation WORLDWIDE. Yes, quantitative easing did play a factor into where the U.S. economy is, but QE was also done across the globe. It was going to catch up eventually and also at that point in time it was hard to gauge how much is enough. It hard to argue that stimulus wasn't needed, especially in this black swan type event. Also with the Fed raising rates that can only do so much, another issue that was highlighted. Increasing rates on consumer loans and making it more expensive to borrow money and all these online banks offering higher yields for savings does nothing to help with the supply chain issues. Factories and cities being shut down in China due to outbreaks, lack of freight drivers, lack of workers to move supplies at the docks are still impacting us today. Raising interest rates does not and will not mitigate this issue in regards to the supply chain.
Macro Concerns
There is also a spree of layoffs going on throughout the workforce. Big name companies like Coinbase, Netflix, and Tesla have laid off hundreds of employees. On the same note there are also companies doing hiring freezes or rescinding offers to individuals they were going to hire. This is due to the speculation of a potential recession and also to cut costs. We are also approaching earnings season. Obviously these companies already know what they are going to report. What's worrisome is how the market will react and what could potentially lie on the horizon. Last earnings season we saw with Target and Walmart, both claimed high costs, supply chain issues, and inventories hurt their profit. Supply chain issues has been mentioned on this site as early as the October 2021 Watchlist. Some companies have done a great job managing it but some have also faltered or did too much buying in order to get ahead. That's why we see some inventory issues across industries and also the fact that the consumer has changed their spending habits over these past few months due to rising costs. "Are companies able to pass this cost onto their consumers? Will consumers be willing to pay it when they themselves are dealing with inflation too? The sharp rise in rents, gas, and goods has put the consumer in a position where there simply isn't enough money going around. They too are looking to cut costs. Inflation has simply dug its roots in and is affecting everyone. "-from the May 2022 Watchlist. The landscape is constantly changing and we are finding ourselves in a somewhat chaotic and uneasy time leading to volatility and uncertainty. Don't forget, volatility is a key component of the market. It's not the prettiest but it offers opportunities for those that participate.
Crypto & Digital Assets
In the world of crypto we are headed towards what is known as "Crypto Winter". We saw two of the major players in the space, Bitcoin and Ethereum, fall to deep levels that scared off a lot of people. Bitcoin dipped below $20,000 a coin and Ethereum fell below $1,000. We also saw some big names in the crypto space that needed some bailing out (Voyager and Blockfi), paused or frozen transactions (Binance), and a big loss in confidence in the crypto space. The crypto market was almost at $3 trillion at its highest back in November 2021, now its under $1 trillion. There are a ton of worthless coins and projects in the crypto space but there is some value in the underlying technology that is blockchain. The same way investors approach the traditional markets should be the same way you approach crypto in my opinion. Go for your blue chips such as Bitcoin and Ethereum and for some diversification an investor can look into the DeFi Pulse Index. The DeFi Pulse Index is an index that tracks the performance of tokens within the Decentralized Finance (DeFi) space. This could be a "safe" way to dabble into the crypto space. Invest at your own risk and remember, no investment is 100% safe.
Monthly Performance
At the close of the month all the indexes are down. The Dow Jones (-6.45%), S&P 500 (-7.86%), NASDAQ (-8.19%), Russell 2000 (-9.29%). At the close of the month the VIX was at 28.86. The "Fear and Greed" index was at 23 at the end of the month indicating extreme fear.
Index Performance
| Index | Performance |
|---|---|
| Dow Jones (Jun 2022) | -6.45% |
| S&P 500 (Jun 2022) | -7.86% |
| NASDAQ (Jun 2022) | -8.19% |
| Russell 2000 (Jun 2022) | -9.29% |
Top Sectors
Bottom Sectors
Stock Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| NKE | $96–$114 | $94–$126 |
| ABNB | $80–$105 | $80–$105 |
| MSFT | $241–$267 | $230–$273 |
| AAPL | $130–$143 | $122–$151 |
| Z | $28–$40 | $27–$42 |
| SQ | $57–$90 | $55–$72 |
| PYPL | $58–$94 | $59–$94 |
| MCD | $228–$253 | $207–$255 |
| WMT | $117–$123 | $117–$130 |
| TSLA | $623–$769 | $622–$792 |
| SBUX | $71–$82 | $71–$82 |
| V | $191–$206 | $184–$217 |
| PG | $140–$147 | $122–$149 |
| WM | $148–$158 | $135–$160 |
| CHPT | $10–$14 | $12–$17 |
| IIPR | $108–$126 | $98–$140 |
| SHOP | $31–$42 | $29–$49 |
| ADBE | $349–$390 | $327–$390 |
| AMZN | $100–$113 | $100–$127 |
| CRWD | $130–$189 | $130–$189 |
| NVDA | $126–$173 | $128–$197 |
| COST | $405–$494 | $407–$492 |
ETF Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| ARKK | $35–$47 | $33–$53 |
| VUG | $216–$228 | $211–$241 |
| VGT | $311–$333 | $307–$357 |
| VOO | $335–$353 | $335–$374 |
| SMH | $198–$210 | $175–$221 |
Key Takeaways
- →June 2022: S&P officially entered bear market (-20% from ATH); Fed raised 75bps — largest since 1994.
- →SHOP split 10:1 (06/28); AMZN split 20:1 (06/06) — prices adjusted.
- →Inflation hit 9.1% (40-year high); recession fears now primary market concern.
- →Healthcare, Consumer Staples, Real Estate provided relative defense in the selloff.
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