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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • September 23, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Bonds Looking More Attractive than Stocks

» Bond Market More Worried than the Stock Market

  » The Fed isn’t Close to Stopping
 
 
 
 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Capital Markets Commentary
By Aaron Adkins, Communications Strategist  • August 2022

» Inflation Remains Hot

» Federal Reserve Update

» U.S. Manufacturing Remains Solid

AN UGLY MONTH FOR THE MARKETS
Inflation Runs Hot
Inflation for August showed no signs of easing as CPI increased 0.1% for the month. This brought the year over year change to 8.3%, despite gasoline costs declining sharply. These declines were offset by increases in medical care, food, and shelter. The uncertainty on when inflation will start to subside continues to cloud the investment outlook and is causing confidence to remain low.

The equity market produced mixed performance results among growth and value styles but ended the month essentially flat. The S&P 500 Index is down -14% year-to-date, while bonds continue to struggle amid the Fed’s rising rate environment and declined -2% in August. This year, fixed income securities, as represented by the Bloomberg U.S. Aggregate Index, are having an incredibly challenging year and are down more than -10%. 

Federal Reserve Update
The Federal Reserve held its annual meeting at Jackson Hole, Wyoming this month and reiterated its commitment to reducing inflation. The market was expecting stern guidance, and that is exactly what Powell delivered. Fed Chair Jerome Powell was steadfast in his speech at Jackson Hole last month where he said, “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” Additionally, he said, “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.” Reducing inflation will provide some headwinds to the economy that is sure to produce below-trend growth. Below is a visual illustration of the economic headwinds that the Fed has created since the beginning of this year.

FED FUNDS TARGET RATE: UPPER LIMIT

SOURCE: FRED

For many Americans, below trend growth is concerning because, as of July, according to LendingClub, more than 59% of Americans are living paycheck to paycheck. The Federal Open Market Committee will meet again on September 20–21 where the marketplace is expecting another 0.75% hike in the Federal Funds rate.

The U.S. economy added 315,000 jobs in August exceeding market expectations of 300,000, but the unemployment rate rose slightly to 3.7%. Also, the BLS reported that 11.24 million job openings were available in July, which was 1 million more than estimated. This data indicates that the job market is still extremely tight in the U.S. with nearly twice as many job openings as there are available workers.

Manufacturing Remains Solid
Manufacturing levels maintained their strength over the last month. When looking at the Services, ISM Non-Manufacturing PMI Index beat consensus estimates of 55.1 with a result of 56.9 for August. This was the strongest level of growth in the last several months. Manufacturers, as represented in the ISM Manufacturing PMI survey, held steady with an index reading of 52.8 in the month of August, in line with estimates. Both indices continued to show expansion as their levels were above 50.

Oil prices continue to fall as worries of a global recession loom for investors. WTI crude ended August trading at $86 a barrel. While this decline is helping to ease the concerns of those focused on inflation, the long-term strength of the economy continues to be in question. Shortly after August, OPEC producers decided to implement a cut in production of 100,000 barrels per day.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.                                                                                                                                                         

0116-MAM-9/15/22-13399

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • September 9, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Expect a 75 bps hike by Fed in September

» The move in global interest rates is higher

  » The labor market remains strong…for now
 
 
 
 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Special Edition: Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • August 26, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Market Experiences Most Volatility Since June

» Powell Swings Back at the Market

  » Risk Remains Elevated
 
 
 
 
 
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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July 2022 Monthly Commentary 
By Aaron Adkins, Communications Strategist  • July 2022

KEY TAKEAWAYS 

» Equities Rebound

» GDP Contracts in Q2

» Oil Prices Slide

July provided investors some relief, as performance was very positive during the month for domestic equity markets. The S&P 500’s monthly return of more than 9% shaved off nearly half of its 2022 bear market decline. The same was true for the Russell Midcap and Russell 2000 Indexes, rising more than 9% and 10% respectively. All the S&P sectors climbed higher in July, with technology stocks leading the rebound. 

RECESSION?
GDP contracted -0.9% in the second quarter, making it the second consecutive quarter of negative growth for the U.S. economy after the first quarter declined -1.6%. Historically, two consecutive quarters of contracting GDP was an unofficial-but-accepted consensus definition that economists would use to signal that a recession had occurred. Officially, the National Bureau of Economic Research, a nonpartisan committee of eight economists, determines when recessions begin and end by reviewing other data besides just GDP. They review a myriad of additional statistics like job creation, wage growth, consumer demand, etc. The NBER helps determine this event by providing a more comprehensive assessment of how the economy was impacted, rather than looking at one data point.

ISM CONTINUES TO EXPAND
Domestically, the U.S. continued to show signs of strength, as the ISM Manufacturing PMI index reached 52.8 in July. This was down from a level of 53 in June but exceeded expectations of 52. On the services side, ISM Non-manufacturing PMI printed a 56.7 reading compared to consensus estimates of 53.5. This surprising increase showed better production and higher levels of new orders. An index reading above 50 shows that these indexes expanded while a number below 50 signals a contraction. 

INFLATION
Inflation continues to create financial challenges for Americans. The increase in prices is also leading to an increase in the amount that Americans are borrowing. In fact, credit card balances increased 13% over last year. This contributed to an increase in U.S. household debt which now exceeds $16 trillion for the first time in history. 

U.S. ANNUAL INFLATION RATE

SOURCE: US BUREAU OF LABOR STATISTICS

Year over year core inflation was 9.1% in June, spurring the Fed to raise the Fed Funds target rate by 0.75% on July 27, making it the second consecutive hike of 0.75% and the fourth increase overall in 2022. This increased the Federal Funds Target Rate range to 2.25%–2.50%. July’s annual inflation rate slowed to 8.5% which was below market expectations providing optimism that maybe the worst of the inflation scare is behind us. Weakening global demand from areas in China and Europe and outbreaks of COVID-19 continue to play a significant role in factory productivity and global growth expectations. This contributed to oil trading down in July from $105 to $94/bbl providing some relief for U.S. consumers continuing to battle with inflation.

WHAT WILL THE FED DO NEXT?
The labor market has been resilient. Nonfarm payrolls increased by 528,000 in July compared to estimates of just 258,000. This was the largest increase in jobs since February and the unemployment level also ticked down from 3.6% to 3.5%. The Fed meets again in September and a strong payroll number suggests that maybe there is a greater likelihood of a “softlanding” for this economy to handle the rate increases without falling into a recession, as previously thought. Currently, market expectations continue to price in the expectation of another 0.75% hike at the September meeting, with many participants expecting only a 0.50% hike after inflation showed some signs of slowing last month.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.                                                                                                                                                         

0116-MAM-8/12/22-28045

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • August 19, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» 90% of stocks above their 50-day MA

» Early Signs of Buying Fatigue?

  » New home prices below existing home prices for first time in history
 
 
 
 
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • August 5, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» “Recession” is Everywhere

» Fed Fund Rate Expectations Quickly Reverse

  » 10-Year U.S. Treasury Yields Decline Rapidly in July
 
 
 
 
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Capital Markets Update Q2 2022
By Angelo Manzo, VP, Private Wealth • August 2022

STOCKS AND BONDS ARE NEGATIVE 
It was a challenging quarter for investors. High inflation, slowing growth and rising global interest rates negatively impacted global equity and fixed income markets. The equity market officially fell into bear market territory (down more than 20%) and “low risk” bond markets registered losses. Since 1975, there have been 8 years when the S&P 500 has posted negative annual returns. If current returns remain at year-end, this will mark the first year the S&P 500 and Bloomberg US Aggregate Index were negative. Fixed income allocations have failed to provide diversification and income that would be necessary to offset equity weakness. For those balanced investors in 60/40 allocations, this is the worst first half of the year since 1962. While the past 6 months have been challenging, it is important to maintain a longer-term investment horizon. 

S&P DOWN YEARS AND BOND RETURNS

SOURCE: BLOOMBERG

NOT EVERY BEAR MARKET IS THE SAME 
While not all bear markets precede recessions, all recessions are preceded by bear markets. There have been only 14 S&P 500 bear markets since WWII (based on 20%+ decline on a closing basis with no rally of 20%+ in between). Highlighted are the 8 of the 14 bear markets that turned out to be a recession. On average, the average full bear market decline has been 32% and the bear market has averaged 339 days. No bear market is the same, but history can give us a gauge on possible outcomes.

BEAR MARKETS POST WW2 

SOURCE: BESPOKE

INDICATORS AT BEAR MARKET BOTTOMS
Looking at various indicators we can compare the current bear market to past bear markets. The P/E ratio remains elevated relative to historical turning points. The CPI is far above average and the unemployment rate is below average. The recent aggressive tightening of monetary policy will likely result in a normalization of CPI and unemployment. Interestingly, high yield spreads have not widened to a level close to previous bear markets and there could be further spread widening. 

SOURCE: STRATEGAS

INCOME HAS RETURNED TO FIXED INCOME
The sharp rise in yields has led to greater income in fixed income portfolios. Across fixed income, yields have more than doubled in only 6 months. The Bloomberg US Bond Aggregate returned 1.75% and is now nearly 4%. For taxable clients, the municipal index has increased from 1.11% to 3.21%, which is over 5% on a tax equivalent basis for investors in the highest federal tax bracket. The higher yield on fixed income allocations provides greater protection to portfolios and reduces portfolio volatility. Actively managed fixed income portfolios with a longer term horizon are in a much better position to capitalize on fixed income opportunities and diversify allocations. 

SOURCE: STRATEGAS

WHAT IS MEEDER PRIVATE WEALTH?
Meeder Private Wealth is our customized separately managed account (SMA) which is managed with a strategic investment discipline. As we look at the core components of private wealth, it is important to note that we have a vast ability to customize. This is not a one size fits all approach. Each client is unique and has their own goals and objectives, so each portfolio is built specifically to that client’s unique situation. Additionally, as we move through time and the client’s goals and objectives change, Private Wealth has the flexibility to adjust and change as needed.

For risk management we take a holistic approach, we want to know as much about each client’s financial situation as possible. The more information we have about their entire financial picture the more effectively we can manage their investments and ensure we are maintaining their specific risk profile. We can manage around concentrated positions, excluding stocks, sectors, or industries. All this information can be considered and allows our team to build the portfolio to be as effective and efficient as possible while maintaining the agreed-upon risk profile.

An area that we would consider to be one of the most underserved from a portfolio management standpoint is tax management, tax management often represents a large part of our conversations with advisors and clients. We implement active and ongoing tax-loss harvesting, as well as gain deferral when needed. The tax loss harvesting isn’t simply selling stocks that are down at the end of the quarter or the end of the year. This is a more thoughtful approach where every account is reviewed daily to determine if there are opportunities within the portfolio to harvest losses. This active tax management allows us to maximize after-tax wealth for our clients and generate tax alpha.

Finally, this is a transparent and unbiased approach. While Meeder does offer a full suite of mutual funds, we do not use any proprietary products inside of private wealth. Also, the clients will always be able to see in real-time the positions that are being held in the account, along with access to our investment team as needed to answer any questions that may arise.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.                                                                                                                                                         

0183-MAS-8/3/22-27338

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Fixed Income Commentary 
By Don McConnell, Director of Fixed Income • July 2022

FIXED INCOME QUARTERLY
It was the worst of times…and it got worse. The second quarter of 2022 posted the second worst quarterly performance in the history of the bond market index, behind only the first quarter of 2022. The Bloomberg U.S. Aggregate Index dropped 4.69% in the second quarter after an abysmal -5.93% in the first quarter. Corporate bonds were down 7.26% while the securitized sector dropped 3.90%. No sector of the bond market escaped the negative return path, although spreads (to equivalent duration treasuries) in the high yield and lower-rated portion of the investment grade space stabilized at the end of the quarter. This was evidently created by a Fed-induced reaction to the quickly changing expectations for the path and ultimate level of the Federal Funds Overnight Rate, and the pricing of weaker growth prospects for domestic markets.

The US Treasury 10-year bond started the quarter with a yield of 2.34% and ended at 3.02%, after hitting a high of 3.48%, a result of the largest increase in rate volatility in over three years. The largest one-day selloff in 10-year yields since 2008 was also an unwelcome data point, as risk contagion was bleeding into all markets. At the front end of the curve, the US 2-year Treasury note rose from 2.34% to 2.96%, with a high of 3.43% in mid-June. Clearly, uncertainty spread throughout the curve as inflationary expectations were priced in and the markets adjusted to a new interest rate environment. 

US TREASURY ACTIVES CURVE

SOURCE: BLOOMBERG

The Fed began the process of getting the Fed Funds rate back to neutral in March and continued with two more step-ups in the quarter; 50 basis points on May 4 and a further 75 bps on June 15. This was the first time since 1994 that the Fed tightened policy so much at one meeting, and further testament that they view inflation as the single biggest threat to the health of the economy. With inflation running over 9% at the CPI level, and 11% at the producer level, they are pushing very hard to get future inflationary expectations down and to reduce current demand to align with the diminished level of supply that is still a concern. At the end of the quarter, market expectations pointed toward the Fed raising rates throughout the year until the Federal Funds Rate reaches the 3.25-3.50% range, double the current level.

One of the surprising sources of strength in the market has been the jobs market. The unemployment rate has remained stable at 3.6%, while the Labor Force Participation rate ended the quarter around 62.2%. Interestingly, the number of available job openings has reached multi-decade highs, keeping wage pressures high and the outlook for the unemployment rate very well contained around current levels.   

LABOR FORCE PARTICIPATION RATE


SOURCE: BUREAU OF LABOR STATISTICS, BLOOMBERG

FIXED INCOME INSIGHTS
MONEY MARKETS
»  Money market product has been fighting an uphill battle over the past couple of years as a flood of cash has been parked by many counterparties seeking refuge from low yields and increased volatility. Despite the hurdle, investments in the short part of the yield curve offer attractive yields today. At the beginning of the quarter top tier commercial paper (CP) had a spread of 89 basis points over term equivalent Treasury bills. By the end of Q2 the relationship grew to 115 bps. In addition, the steepness of the money market curve moved from 150 bps to 186 bps during the same period, as measured by overnight rates out to 365 days. At the beginning of the quarter, 1-year Secured Overnight Financing Rate (SOFR) printed at a spread of the index +45 bps. By the end of the quarter for the same term, the spread to the index was +62 bps. 

»  As expected with all the activity in the money market arena, most participants adopted a conservative strategy. Portfolio positioning has moved extremely short with the weighted average maturity (WAM) of most money funds falling from approximately 40 days at the beginning of the year, to under 20 days by the end of the second quarter. 

CORPORATE BONDS
» Investment grade corporate bond spreads increased by 0.42% to 1.56%, and yields rose by 1.10% to 4.70%. However, with the combination of higher US Treasury yields and corporate bond spreads, the total return of the investment grade corporate bond market fell by -7.26%. The total returns and excess returns were negative across each duration segment and across the credit spectrum. However, longer duration and lower credit quality segments underperformed the most in terms of both total returns and excess returns. 

» With the repricing of corporate credit spreads to reflect lower growth and/or recessionary probabilities, we think opportunity remains to selectively add corporate credit exposure to portfolios. The movement in yields and spreads for certain segments of the corporate market will provide an attractive entry point for adding yields not seen in more than a decade, with limited downside risk of further spread deterioration. The challenge will be to determine when to add exposure and in which segments of the sector. 

LOOKING FORWARD
We continue to believe that volatility in the fixed income markets will remain elevated throughout this Fed cycle. As rates drift higher on the front end of the curve, 5-years out to 30-year bonds could continue to increase in price as the market prices-in the odds of recession, and foreign demand for the US dollar and our bonds adds to the demand for longer duration instruments. While opportunities will present themselves for good entry points to add spread and risk to the fixed income portfolios, we are cognizant of the technical aspect of trading these anomalies and will be disciplined in our approach.

Investment grade spreads typically widen into a recessionary period as balance sheets weaken and purchasing power is lower. The Fed will continue to increase rates until they achieve a neutral level (with Fed Funds at or above the current inflation rate). That type of environment bodes well for diversifying our exposure and following a disciplined duration and spread management approach. The increase in yields is very attractive and locking in higher coupons will be part of our process as we maintain liquidity and utilize a defensive posture.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.                                                                                                                                                         

0116-MAM-7/19/22-26998

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • July 22, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Past Indicators Near Bear Market Bottoms

» Trade Deficits Dragging Down GDP

  » Real Income Continues to Decline
 
 
 
 
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Q2 2022 Quarterly Commentary: President's Perspective
By Aaron Adkins, Communications Strategist • July 2022

A BEAR MARKET IS HERE 

MARKET UPDATE
The S&P 500 Index officially reached bear market territory after finishing the second quarter down more than -20% from its all-time high set on January 3rd. It was the worst first-half performance for the S&P 500 since 1970. Bonds, represented by the Bloomberg Aggregate Index could not escape the carnage either as they also finished June down more than -10% YTD. This was just the third time since 1981 that stocks and bonds experienced two consecutive quarters of negative performance. Prior to that, the most recent occurrence was during the Financial Crisis of 2008.

The second quarter was a continuation of many of the same themes as the first quarter this year, as illustrated in Figure 1. Value stocks outperformed their Growth peers and Large-caps generally outperformed Small-caps. When looking at the 9 style boxes, the performance of each of Russell’s 9 equity style indexes were negative. S&P sectors only had Energy produce positive performance year-to-date, up more than 30%. Utilities, Consumer Staples, and Health Care sectors each had single-digit losses year-to-date. The remaining sectors have experienced negative performance year-to-date, down anywhere from 16-32%. International markets suffered too, just as the global supply chain issues continue to struggle to meet demand.

YTD PERFORMANCE THROUGH JUNE 30, 2022

SOURCE: Morningstar Direct; Bloomberg; Large Value: Russell 1000 Value TR Index, Large Blend: S&P 500 Index TR, Large Growth: Russell 1000 Growth Index TR, Mid Value: Russell Midcap Value Index TR, Mid Blend: Russell Midcap Index TR, Mid Growth: Russell Midcap Growth Index TR, Small Value: Russell 2000 Value Index TR, Small Blend: Russell 2000 Index TR, Small Growth: Russell 2000 Growth Index TR. Developed International: STOXX Global 1800 ex-USA Index TR, Emerging Markets: STOXX Emerging Markets 1500 Index TR

FEDERAL RESERVE
The Fed is trying to restore credibility with the marketplace after dismissing inflationary trends as just being transitory for nearly a year. The Fed took bold action after seeing inflation reach a 40-year high and increased the federal funds rate by 0.75% on June 15, making it the largest single rate increase since 1994. This brought the overnight lending rate between banks to a range of 1.50%-1.75%. The committee is currently telegraphing that they will likely increase rates by an additional 0.75% at their July meeting. The Fed is predicting that the federal funds target rate at the end of 2022 will be between 3.25% and 3.50%, which remains much higher than where rates currently sit. In June, the 10-Year Treasury yield closed above 3.49% for the first time since July 2011. It has also caused the spread between the 2 and 10-year Treasury maturities to invert. This occurs when the economic forecast looks unsteady and investors favor purchasing longer-term debt over short-term debt. They do this to try and lock in long-term bond yields to reduce risk. Historically, this has been a precursor to an economic recession. 

TREASURY YIELDS AND FEDERAL FUNDS RATE


SOURCE: FRED

RECESSION AROUND THE CORNER?
Now that the Fed has committed to “do-whatever-it-takes to control inflation” and will be aggressively raising rates for the foreseeable future, investors are questioning if the economy has what it takes to rebound this time. As the Fed continues to tighten, the question remains, will the economy be able to continue to grow despite the dampening demand caused by an increase in interest rates? The first quarter of 2022 saw the U.S. economy unexpectedly contract by -1.6%. While the National Bureau of Economic Research is responsible for determining the official declaration of a recession, many investors follow the old methodology of two consecutive quarters of negative GDP growth as the definition of a recession. As interest rate increases continue to work their way into the economy, there are signs that some of the demand is already declining rapidly. For example, according to the U.S. Census Bureau, new housing starts declined by -14.4% from April to May.

SENTIMENT AT HISTORIC LOW
Consumers are feeling different about this bear market from others that have occurred in recent years. The University of Michigan Index of Consumer Sentiment survey for June reported a level of 50.0, making it an all-time low in the survey’s history since 1978. It was a substantial drop of more than -14% from May. Previously, investors knew that the Federal Reserve was ultimately backing up the stock market which is why some analysts believe that we had the V-shaped recoveries after the significant drawdowns we experienced in 2019 and 2020. 

RUSSIA AND UKRAINE WAR
As the war between Russia and Ukraine continues to drag on, Ukraine is defending itself on several fronts better than many expected. This unprovoked Russian attack led many countries, including the European Union, to ban the purchase of Russian oil exports. This sent the price of crude oil higher as demand already outweighed supply. Russia is the world’s second largest oil producer behind the U.S. and produces more than 9.4 million barrels per day. This shortage and continued supply chain issues were primary drivers in pushing inflation to reach 40-year highs.

HOW IS THIS IMPACTING PORTFOLIOS?
At Meeder, we manage investment solutions across different risk profiles and time horizons. Meeder manages strategies using a systematic approach that guides us in the allocation of our portfolios. Many of these solutions employ one or more of our core investment strategies: Growth, Defensive Equity, and Fixed Income.

GROWTH
Investment portfolios comprised of the Growth Strategy maintain a more aggressive objective and typically remain invested in the stock market. In the second quarter, equity markets experienced significant volatility as the Russia and Ukraine War continued. This led many countries to ban the purchase of Russian oil exports, sending the price of crude oil higher and exacerbating supply chain disruptions. The Fed took bold action after seeing inflation a reach 40-year high and increased the federal funds rate by 0.75% on June 15 making it the largest single rate increase since 1994. This volatility caused the performance of nearly all equity markets to struggle. Investors that remained in the Growth Strategy experienced more volatility than our Defensive Equity strategies but achieved performance similar to the equity market as represented by the S&P 500 Index.

DEFENSIVE EQUITY
Portfolios that utilize the Defensive Equity Strategy follow a rules-based and data-driven approach using the Meeder Investment Positioning System (IPS) model. This investment model is used to determine the risk relative to the reward available in the marketplace and identify when we should be increasing or decreasing the portfolio’s equity exposure. At the beginning of the quarter, the strategy had a 70% allocation to equities. By the end of April, credit risk continued to rise, and inflation, interest rates, and geopolitical uncertainty weighed on the model score. The IPS model guided us to reduce our allocation to equities to 51%. In the middle of May, the long-term trends and momentum were very weak. Valuations remained elevated, causing us to reduce our equity allocation to as low as 32%. In early June our intermediate and short-term models became a little more positive due to the extreme number of flows into inverse bearish ETFs. We view this from a contrarian perspective and increased our equity exposure to 41%. For the remainder of the quarter, any improvement in the IPS model scores were essentially negated by the heightened volatility present in the marketplace. The defensive equity positioning throughout the quarter substantially reduced the market volatility experienced by investors relative to the equity market as measured by the S&P 500 Index. 

FIXED INCOME
The Meeder Fixed Income Strategy tactically shifts portfolio exposure utilizing our proprietary investment models. These models are designed to actively monitor factors to guide us in determining the credit quality, emerging market debt exposure, and the portfolio’s U.S. Treasury duration.

Meeder Fixed Income portfolios started the second quarter with exposure to high yield bonds, investment-grade bonds, short-term U.S. Treasuries, and cash. As market volatility increased early in the quarter, momentum and volatility factors in our credit model signaled risk-off sentiment and we reduced high yield positions in our portfolios, moving the proceeds to cash. We also extended portfolio duration from mid-May through mid-June, as momentum factors in our duration model indicated relative strength in longer duration Treasuries. As volatility subsided towards the end of May, macroeconomic, momentum and volatility factors in our credit and emerging markets led us to increase high yield and emerging market exposure briefly.

However, rate volatility in the fixed income markets continued to rise during the quarter and the Federal Reserve surprised the markets with a higher-than expected, 0.75% rate hike on the federal funds rate in June. Our models ultimately guided us to exit high yield and emerging market positions in mid-June, increasing the cash position in our portfolios. Higher cash exposure helped our portfolios’ relative performance against market benchmarks on the downside during the quarter. 

One-third of the portfolio remained invested in U.S. Investment grade securities throughout the quarter. At the end of the second quarter, we reduced High Yield and Emerging Market exposure and shortened the duration by raising cash.

LOOKING AHEAD
Inflation will remain a very important issue for the global economy in the foreseeable future. This presents unique and challenging environment that we have not seen for more than 40 years. The good news is that we have seen inflationary times worse than this and have built our models with everything we learned since that time. While no two economic periods are the same, we will continue to make our investment decisions based on economic data and factors that remove emotion from the decision making process. We will continue to follow our disciplined process and rules-based approach to managing money and, as always, we thank you for trusting us to help you reach your financial goals.

Sincerely, 

ROBERT S. MEEDER
PRESIDENT AND CEO

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.                                                                                                                                                         

0107-MIM-7/14/22-26925

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • July 8, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» The bull market ended in Q2

» Quick look at bear markets in history

  » Fed funds rate well below inflation is still a large risk
 
 
 
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • June 24, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» U.S. Small Caps Leading the Way Down

» Market Decline Entirely Multiple Compression

  » Housing Slowing While Prices Remain High
 
 
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Early June 2022: Monthly Commentary
By Aaron Adkins, Communications Strategist • June 2022

KEY TAKEAWAYS 

» The Fed Still Raising Rates 

» Shrinkflation

» Russian Oil Ban 

CAPITAL MARKETS UPDATE
This month the S&P 500 Index reached a drawdown of more than -19% from its all-time high reached back in December, as fears over the Fed’s ability to contain inflation remain widespread. At the end of May, the total return of the S&P 500 Index had fallen more than -12.7% year-to-date. Bond investors, which are usually sheltered from this type of volatility, also experienced negative returns as rising interest rates caused bond prices to fall. The widely held Barclays U.S. Aggregate Bond Index was down -8.9% year-to-date.

This instability is leading Americans to wonder if this could be the beginning stages of an economic recession. Last quarter’s GDP unexpectedly declined by -1.5%. It is not surprising that with weak economic outlooks coming from Wall Street’s largest retailers like Walmart and Target, some investors are bracing for the worst. At the very least, it is likely the economy is entering a period of stagflation, where interest rates are rising and there is little economic growth. This type of economy is something the U.S. has not seen since the 1970s but has occurred due to the combination of unusual circumstances that included the impact of COVID-19, low-interest rates, and the Russian war in Ukraine.

The Federal Reserve is the independent government agency, responsible for maintaining full economic employment and price stability. The May nonfarm payrolls report showed the U.S. created 390,000 jobs, exceeding consensus estimates of 325,000. Current unemployment remained at just 3.6%, so the Fed is remaining laser-focused on fighting inflation in the U.S. The latest May CPI annual report showed an increase of 8.6% year-over-year, making it the highest reading for this index since 1981. The headline CPI results were driven by nearly a 35% increase in energy prices and 10% in food costs. The positive news is that core inflation, which removes these two categories, decelerated to a 6% increase in May year-over-year, signaling that some components of inflation could be trending down.

The Fed is tasked with providing the U.S. economy with a “soft landing,” attempting to reduce inflation while not stifling economic growth. Fed Chair Jerome Powell referred to 1965, 1984, and 1994 as years where the committee previously accomplished this. The Fed is increasing interest rates over what is expected to be the foreseeable future. This is causing demand for big-ticket purchases like single-family homes to slow, as the cost to borrow money becomes more expensive. Mortgage demand has reached a 22-year low after this year’s rate hikes. 

Smaller ticket items are also being impacted through shrinkflation. This is becoming more widespread and is another way manufacturers are cutting costs. This subtle tactic is used by manufacturers where they reduce the quantity of a product but keep the same selling price. For example, a popular sports drink reduced the number of ounces in its typical bottle from 32 to 28 oz. for the same price. This is a discreet way for manufacturers to pass along increases in input costs to the consumer without explicitly raising the price tag on their product.

One significant contributor to inflation is occurring at the gas pump and is reducing the discretionary income of most Americans. Oil, as represented by WTI crude, climbed higher during May as the commodity reached $115/bbl. by the end of the month. The latest data, provided by the U.S. Energy Information Administration, shows that Russia remains one of the top 5 oil-producing countries, which combined are responsible for over 51% of global daily production. This illustrates the significance of the oil supply that the Russian ban is removing from the marketplace.

5 LARGEST OIL PRODUCING COUNTRIES 

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

According to BBC News, the European Union imports 25% of its oil from Russia, equating to approximately 2.2 billion barrels per day. Despite their past reliance on Russia’s energy, the European Union agreed to phase-out purchases of Russian oil over the next six months. The ban will apply to the oil that it receives via cargo ship, but not yet from its pipeline. This still accounts for nearly 2/3 of the total imported from Russia to the European Union.

As developed nations continue the implementation of banning the purchase of Russian oil, global demand continues to exceed the available supply. This is continuing the streak of record-high gasoline prices. According to AAA, the U.S. national average for the cost of regular unleaded gasoline at the pump was $4.62/gallon at the end of May. Expectations are that the national average for the price of regular gas unleaded may exceed $6/gallon by the end of summer.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.

0116-MAM-6/13/22-13399

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • June 10, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Volatility at historic high in 2022

» Investors bought the bond dip in May

  » Mortgage rates skyrocket
 
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • May 27, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Stock and Bond Markets both negative in 2022

» Dow Jones hits record losing streak

  » Poor odds to bet against the stock market long-term
 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Early May 2022: Monthly Commentary
By Aaron Adkins, Communications Strategist • May 2022

KEY TAKEAWAYS 

» Fed Raises Rates 

» Inflation Still Persistent

» U.S. GDP Contracts in Q1

CAPITAL MARKETS UPDATE
Performance of the S&P 500 Index struggled in April and declined over -8%, bringing the total year-to-date decline to almost -13%. Concerns about rising inflation contributed to the selling of stocks, as those with higher multiples were especially hit hard. Investors rapidly sold their positions in these companies in favor of those with more solid fundamentals given the uncertain economic outlook. Companies in the tech-heavy NASDAQ Composite were especially targeted, with some experiencing as much as a -40% fall. The index experienced its worst-performing quarter since 2008. On average, the guidance and outlook provided by corporations was grim and caused some to fear stagflation, which is a slowing economic environment combined with rising inflation. In April, all the S&P sectors move lower except for consumer staples, which climbed +2%. Widely held large, mid, and small-cap benchmarks for both growth and value styles also posted negative returns for the month. The 10-year U.S. Treasury yield climbed nearly 3%, as the performance of the Bloomberg U.S. Aggregate Bond Index fell more than -3% for the month and -10% year-to-date in one of the worst fixed-income environments that investors have ever experienced.

CPI INFLATION 12-MONTH PERCENT CHANGE
APRIL 2022

SOURCE: BLS

EMPLOYMENT SITUATION
Nonfarm payrolls added 467,000 jobs, missing the consensus estimate of 510,000 in January. The unemployment rate also rose slightly from 3.9% to 4.0%. According to the Bureau of Labor Statistics, there were 68.9 million people in the U.S. that separated from their employer in 2021. Out of this number, 47.4 million workers voluntarily quit their job. Economists are calling this event “The Great Resignation.” This has caused staffing shortages across the economy that range from the most basic to the most skilled positions in the workforce. There are now more than 10.9 million job openings in the United States. The lack of staffing has forced some factories and businesses to operate with fewer employees. Even worse, are those companies that cannot stay open during their regular business hours because they do not have the staff necessary to function. Despite all of this, productivity as measured by GDP exceeded expectations for the fourth quarter of 5.5% with a result of 6.9%.

FEDERAL RESERVE
The Federal Reserve got investors’ attention after providing details on their path on monetary policy. The committee stated that they are committed to containing inflation and implemented a 0.50% increase in the Federal Funds overnight lending rate at their May meeting. This raised the target range to 0.75-1.00%, which was in line with investors’ expectations. It was the largest single increase in interest rates by the Fed since May 2000. In addition, they set the expectation that it is likely there will be rate increases at each of the remaining meetings in 2022. According to Bloomberg, the market is currently pricing in the likelihood that there will also be 0.50% increases at the FOMC’s June and July meetings before the committee regroups for the remainder of their meetings in September, November, and December. Additionally, the FOMC minutes from the March meeting stated that the committee would be reducing the size of its balance sheet by up to $95 billion in assets per month. Interest rates of longer-term maturities spiked on the news.

U.S. ECONOMY CONTRACTS IN FIRST QUARTER 
Although economists provided consensus estimates of an expected growth rate of +1.1%, the U.S. economy sputtered during the first quarter of 2022 as GDP unexpectedly contracted by -1.4% quarter over quarter. There were two main reasons for this decline. The first surrounded a substantial reduction in gross private domestic investment growth from +36.7% to just +2.3%. This is a measure of the investment of domestic businesses within their own country. The other major factor was a reduction in the number of exports leaving the country. In the first quarter, there was a -5.9% decline in exports compared to the fourth quarter. Domestically, signs of economic strength weakened in April as the Institute of Supply Management Survey index levels declined. The ISM Manufacturing PMI index fell below estimates of 57.6 to a level of 55.4 for the month. This is down from March’s index level of 57.1. Service-oriented companies represented by the ISM Non-Manufacturing PMI index also fell short of consensus estimates of 58.5 for April, reporting an index level of 57.1. While these measures were short of expectations, they did still show expansion. Any level above 50 shows growth.

LABOR SHORTAGE CONTINUES 
The labor shortage in the U.S. continues to expand. In March, 205,000 additional openings were added to bring the total to 11.6 million job openings. This is the highest level since this data started being recorded in December 2000. One contributor to this shortage continues to be those that voluntarily quit their job. In March, the number of Americans that quit their job reached a total of 4.53 million. The good news is that the U.S. economy added 428,000 jobs in April, above estimates of 391,000. All employment sectors saw gains with leisure and hospitality adding the most hires.

RUSSIA AND UKRAINE
The uncertainty surrounding the war between Russia and Ukraine also provides uncertainty for investors. The region’s energy and food markets are disrupting supply chains and increasing prices, adding to the already high global inflation. The economic impact of this war will take years before the full impact is determined. Ukraine continues to reach out to members of NATO for military equipment and financial support. The U.S. has provided a total of $2 billion in security assistance to Ukraine since January 2021.

HOUSING PRICES SOAR
Single-family housing prices in the U.S. climbed at a record pace of +20.2% year-over-year in February. The S&P Core Logic CaseShiller index showed that all 20 cities represented increased by double digits. This was the highest monthly increase since the inception of the index in 2000. This along with rising costs due to higher interest rates contributed to a decrease in affordability and contributed to new home sales falling in March by -8.6% month over month.

COVID-19 UPDATE
The CDC provided an updated analysis of the COVID-19 pandemic that is suggesting the U.S. is closer to achieving herd immunity. According to their new study, 58% of the U.S. population now has antibodies from previously contracting the disease. This does not include anyone that has antibodies from immunotherapy or a vaccine. The omicron variant saw an unprecedented spread in January and February of 2022, increasing the percentage of the population with antibodies from just 34% in December. The data showed that the segment responsible for the biggest increase was children between ages 5 and 17, which were the most recent age group that received approval for the COVID-19 vaccine.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.

0116-MAM-5/12/22-13399

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • May 13, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Interest rates rise to highest level since 2018

» Valuations coming down but still elevated

  » Some signs of extreme selling

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Capital Markets Update: Q1 2022
By Angelo Manzo, VP, Private Wealth • April 2022

It was a difficult quarter for investors as equity and fixed income allocations experienced negative returns. In our quarterly review, we discuss inflation, the recent yield curve inversion and likelihood of a recession. 

INFLATION
Inflation continues to climb and is now at 40-year highs. Figure 1 shows that transportation was a detractor to inflation in 2020 and early 2021, but transportation is now a key driver in the rise in inflation. The year-over-year growth will become more difficult in the future, and we are closer to peak inflation. While we expect inflation to moderate through this year, we expect the supply chain bottlenecks and strong demand to keep inflation elevated above the Fed’s 2% target.

CAN INFLATION SUSTAIN AT THIS RATE?
ROUGHLY ONE-HALF OF THE CONTRIBUTION TO INFLATION IS COMING FROM MORE CYCLICAL, SUPPLY CONSTRAINED CATEGORIES



SOURCE: COLUMBIA THREADNEEDLE

YIELD CURVE INVERSIONS 
YIELD CURVE INVERSIONS AND FORWARD RETURNS 

SOURCE: BLOOMBERG & STRATEGAS
AVERAGE S&P 500 PERFORMANCE FOLLOWING YIELD CURVE INVERSIONS


SOURCE: BLOOMBERG & STRATEGAS

The yield curve is an excellent predictor of a recession, but it lacks predictability in terms of magnitude and duration. Figure 2 illustrates that when looking back at previous recessions, there is an average of 14 months after the inversion of the 10-year Treasury and 2-year Treasury before a recession starts. While many investors are quick to move defensive on a yield curve inversion, history has shown that it can be detrimental to portfolio performance. Markets have historically outperformed in the years following an inversion.

In our analysis of yield curve inversions, we place greater weight on the percentage of points on the yield curve that are inverted. Figure 3 shows that historically, it is difficult to avoid a recession when over 50% of points are inverted. 

PERCENTAGE POINTS ON INVERTED YIELD CURVE

SOURCE: STRATEGAS

 

PORTFOLIO REVIEW 
FIXED INCOME ASSET CLASS YIELDS AND Q1 RETURNS 
The sharp rise in rates and spreads negatively impacted fixed income asset classes. Figure 4 shows how there really was nowhere to hide this past quarter. This has led many investors to question whether fixed income still makes sense in their portfolio. Interestingly, when you look at the percentile rank of the quarterly returns since inception, this was one of the worst quarters ever for many fixed income benchmarks. “Income” has finally returned to fixed income. As shown in the chart, the US Bond Aggregate is yielding nearly 3% and US Municipals are yielding 2.63%, which is over 4% on a tax adjusted basis for investors in the highest tax bracket. High yield bonds are yielding 6%. With the sharp rise in yields, investors are receiving greater income to support returns. Fixed income remains a valuable asset class for income and volatility mitigation. It has been a challenging quarter that tested investors’ abilities to maintain longer term objectives. Over the course of the year, we expect inflation to moderate but remain above the Fed’s 2%. The sharp move higher in yield has priced in many of the upcoming Fed hikes. We continue to monitor economic indicators and market conditions for changes to portfolio positioning. Our team remains dedicated to analyzing market trends and indicators to determine the optimal positioning of client portfolios. 

FIXED INCOME RETURNS 
QUARTERLY LOSSES THAT HAVE NEVER BEEN SEEN BEFORE


SOURCE: BLACKROCK

WHAT IS MEEDER PRIVATE WEALTH?
Meeder Private Wealth is our customized separately managed account (SMA) which is managed with a strategic investment discipline. As we look at the core components of private wealth, it is important to note that we have a vast ability to customize. This is not a one size fits all approach. Each client is unique with their own goals and objectives, so each portfolio is built specifically to that client’s unique situation. Additionally, as we move through time and the client’s goals and objectives change, Private Wealth has the flexibility to adjust and change as needed. We take a holistic approach to risk management, we want to know as much as possible about each client’s financial situation. The more information we have about their entire financial picture, the more effectively we can manage their investments and ensure we are maintaining their specific risk profile. We have the ability to manage around concentrated positions, excluding stocks, sectors, or industries. All this information can be taken into consideration as we are building the portfolio and allows our team to build the portfolio to be as effective and efficient as possible while maintaining the agreed-upon risk profile. An area that we would consider to be one of the most underserved from a portfolio management standpoint is tax management, which often represents a large part of our conversations with advisors and clients. We implement active and ongoing tax-loss harvesting, as well as gain deferral when needed. The tax loss harvesting isn’t simply selling stocks that are down at the end of the quarter or the end of the year. This is a more thoughtful approach where every account is reviewed daily to determine if there are opportunities within the portfolio to harvest losses. This active tax management allows us to maximize after-tax wealth for our clients and generate tax alpha. Finally, this is a transparent and unbiased approach. While Meeder does offer a full suite of mutual funds, we do not use any proprietary products inside of private wealth. Also, the clients will always be able to see in real-time the positions that are being held in the account, along with access to our investment team as needed to answer any questions that may arise.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.

0183-MAS-5/1/22-24761

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • April 29, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» High inflation putting pressure on valuations

» Retail investors getting even more bearish

  » Some signs of extreme selling

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • April 14, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Energy leading the way in 2022

» Retail investors quickly turning bearish again

  » Jobs market improving while inflation remains high

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • April 1, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Stocks look less attractive as interest rates rise

» What does the yield curve inversion mean?

  » Improvement in short-term market breadth of U.S. equities

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • March 18, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» U.S. yield curve is flattening 

» Bond market risk peaking

  » Short-term equity momentum positive

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Capital Markets Update: Russia invades Ukraine
By Aaron Adkins, Communications Strategist • February 2022

KEY TAKEAWAYS 

» Russia invades Ukraine

» Early economic impact of war

» Fed expected to raise rates

RUSSIA INVADES UKRAINE
Russian soldiers invaded Ukraine, attempting to overtake the country by air, land, and sea in an unprovoked attack. Russian President Vladimir Putin stated that Russia could not feel “safe, develop and exist” due to, what he called, threats from Ukraine. The countries of NATO viewed this aggression as senseless and unacceptable, causing them to rally around the Ukrainian people. Several countries are also providing military equipment and humanitarian aid to help Ukrainians defend themselves.

 

EARLY ECONOMIC IMPACT OF WAR
This invasion has financial implications around the world. For example, Russia is being hit with economic sanctions intended to financially cripple the country, which includes many countries removing some of their banks from the SWIFT system. The Society for Worldwide Interbank Financial Telecommunication
(SWIFT) system links financial institutions around the world. The SWIFT system does not send money but is an international standard for banks to send and receive instructions for transferring funds between countries. Removing an entire country from accessing the SWIFT system is widely considered to be one of the most severe economic sanctions a country can impose. Currently, the European Union, Japan, United Kingdom, Canada, and the United States have all enacted the ban.

In response, the Central Bank of Russia raised its primary benchmark interest rate from 9.5% to 20% overnight, making it the highest level in nearly 20 years. The CBR said this interest rate increase “is designed to offset the increased risk of ruble depreciation and inflation.” They are also trying to infuse liquidity into the Russian banking system by holding daily auctions of 3 trillion rubles, equating to roughly $28.3 billion U.S. dollars.

U.S. IMPORTS OF CRUDE OIL AND PETROLEUM PRODUCTS (THOUSAND BARRELS PER DAY)
TOP TEN COUNTRIES

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

This war is disrupting energy markets since Russia generates roughly 10% of the global oil supply. According to Bloomberg, as of May 2021, the United States imported 844,000 barrels of crude and refined oil products from Russia. Several countries, as well as major corporations, are protesting the war and stating that they will no longer be purchasing or refining Russian oil, which has added to the already limited supply. At the time of this writing, the price of a barrel of WTI crude climbed as high as $130, marking its highest level since 2008.

 

FEDERAL RESERVE EXPECTED TO RAISE RATES
It is widely expected that the FOMC will hike the Federal Funds rate by 0.25% at their next meeting in March. Fed Chair Jerome Powell mentioned that the Russia-Ukraine war is adding significant uncertainty to the U.S. economy. Despite this, Powell made it clear that rate hikes are still needed to combat inflation. The recent increase in oil prices has contributed to the inflation problem that the U.S. is already battling. The Consumer Price Index (CPI) rose 7.5% year-over-year in January, marking its highest level in 40 years. In addition, the supply chain issues at U.S. ports continue and are creating challenges for suppliers. This is causing the price of many raw materials to rise and is putting pressure on corporate profit margins.

The Fed’s other mandate, full employment, is also reaching levels consistent with the Fed’s decision to raise rates. Unemployment fell from an already low 4.0% to 3.8% in February. Nonfarm payrolls added 678,000 jobs which were far above the consensus estimate of 440,000. From this total, there were 179,000 jobs created in the leisure and hospitality industries. They continue to gain momentum as more and more people resume business travel and vacation. 

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.

0116-MAM-3/8/22-23157

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • March 4, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Expected bond market volatility spikes higher 

» Putting Russia's economy in perspective 

  » U.S. small cap stocks showing life 

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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The Impact of Geopolitical Events on Capital Markets 
By Angelo Manzo, CFA®, CAIA, Portfolio Manager and Vice President, Private Wealth Management • March 1, 2022

We have received many questions on the current market and how to respond to the Russian invasion of Ukraine. While the Russian invasion is top of mind for investors, these geopolitical events have proven to be short-lived and unpredictable. In a review of previous market shocks, we see that the market has largely shrugged off the geopolitical events.

Market volatility is common, and these bouts of volatility should not derail investors from their longer-term plans. While it is important to have a lifelong financial plan, it is more important to maintain discipline and restrain from allowing emotion to drive investment decisions when the market becomes challenging. Market volatility creates opportunity, and our team will seek to optimize those opportunities based on our long-term market objectives. History has shown that rebounds from market corrections are often quite robust, and it is the patient and long-term investors who are rewarded.


SHOWN IN MONTHS AFTER EACH EVENT. SOURCE: LPL RESEARCH, S&P DOW JONES INDICIES

 

 

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.

3/1/22-22565

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Gauging the Impact of Geopolitical Events on the Capital Markets 
By Angelo Manzo, CFA®, CAIA, Portfolio Manager and Vice President, Private Wealth Management • February 25, 2022

We have received many questions on the current market and how to respond to the Russian invasion of Ukraine. While the Russian invasion is top of mind for investors, these geopolitical events have proven to be short lived and unpredictable. The longer term implications are difficult to quantify with any degree of certainty. Our team seeks to sift through the noise and focus on what matters, which can be challenging when markets experience high volatility.

During periods of low volatility such as 2021, it is easy to forget that corrections are frequent and it is not uncommon for the market to correct -10% during any given year. It has been a challenging market year to date in 2022, and we may see choppiness as the market digests slowing growth, reduced fiscal policy and upcoming tightening of monetary policy. While we don’t anticipate a recession, we should keep things in perspective. The S&P has provided annualized returns of 17% for the past 3 years which is above long term averages. Investors should properly set expectations for strategic portfolios and maintain a longer term focus. As we discuss below, history has shown that rebounds from market corrections are often quite robust, and it is the patient and long term investors who are rewarded.

MARKET RETURNS YEAR-TO-DATE
THROUGH 2/23/22

 

MARKET SHOCK EVENTS
In a review of previous market shocks, we see that the market has largely shrugged off the geopolitical events. Geopolitical events are unpredictable and usually have limited effects over time. Based on the returns shown on this table, the average S&P 500 return 6 months and 12 months after a market shock has been 7.1% and 10.8%, respectively.


 
SOURCE: LPL RESEARCH, S&P DOW JONES INDICIES

 

INVESTOR SENTIMENT
Sentiment metrics reveal the percentage of investors who have a bullish or bearish view of the stock market. Over the past several weeks, bearish sentiment has moved sharply higher. Below we highlight that the only periods of time that bulls have been below 20% and bears over 40%. Extremes in investor sentiment can often indicate higher-probability opportunities. As shown in this table, forward returns are favorable when investors are so bearish.

 

MARKET CORRECTIONS
Market corrections are relatively common. This truth is revealed in these facts:

» Over the past 50 years, there have been 19 market corrections and 8 bear markets. Bear markets are defined by sell-offs where the peak-to-trough decline exceeds 20%.

» While the average intra-year decline is roughly -14% since 1980, 76% of the time the S&P 500 has ended up with a positive return for the year.

» The market has suffered pullbacks of 10% or more in 21 of the last 41 years. The full-year return was positive in 31 of those 41 years- suggesting staying invested has paid off.

MARKET CORRECTIONS AND BEAR MARKETS OVER 50 YEARS

 

MID-TERM ELECTION YEAR
For the past several quarters, we have highlighted the upcoming midterm election year in 2022. These years often exhibit greater market volatility. The average downturn in a midterm election year is -17%, but interestingly, the market rebound from the trough averages over 32%.

HIGHER VOLATILITY IN MIDTERM ELECTION YEARS

SOURCE: STRATEGAS

In conclusion, it is important for long-term investors to maintain commitment to their strategy. Market volatility is common, and these bouts of volatility should not derail investors from their longer-term plan. While it is important to have a lifelong financial plan, it is more important to maintain discipline and restrain from allowing emotion to drive investment decisions when the market becomes challenging.

Market volatility creates opportunity, and our team will seek to optimize those opportunities based on our long-term market objectives.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • February 18, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Investors flock to value & financial ETFs during drawdown

» Inflation expectations dropping 

  » U.S. fiscal policy may detract from growth 

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Capital Markets Commentary 
By Aaron Adkins, Communications Strategist • January 2022

KEY TAKEAWAYS 

» Supply Chain Issues 

» Inflation Running Wild

» Fed Ready to Combat Inflation

Overview
The S&P 500 Index posted a total return of +28.7% in 2021 but pulled back -5.1% in the first month of 2022.The bond market, as represented by the Bloomberg U.S. Aggregate bond index suffered a decline of -1.5% in January. U.S. small-cap stocks were the worst performers of the domestically, falling more than -9.6%. Investors that shifted their allocation toward value stocks weathered the market’s downturn far better than those that remained in growth stocks. The energy sector continued to be the best performing sector by far, rising 18.8%. Oil was a main driver of the energy sector’s outperformance, as WTI rose more than 14% in January alone.

Employment Situation
Nonfarm payrolls added 467,000 jobs, missing the consensus estimate of 510,000 in January. The unemployment rate also rose slightly from 3.9% to 4.0%. According to the Bureau of Labor Statistics, there were 68.9 million people in the U.S. that separated from their employer in 2021. Out of this number, 47.4 million workers voluntarily quit their job. Economists are calling this event “The Great Resignation.” This has caused staffing shortages across the economy that range from the most basic to the most skilled positions in the workforce. There are now more than 10.9 million job openings in the United States.

The lack of staffing has forced some factories and businesses to operate with fewer employees. Even worse, are those companies that cannot stay open during their regular business hours because they do not have the staff necessary to function. Despite all of this, productivity as measured by GDP exceeded expectations for the fourth quarter of 5.5% with a result of 6.9%.

PENT-UP DEMAND AFTER COVID-19
More people are getting back to their normal routines after being restricted from traveling for the past two years due to COVID-19 precautions. There are already signs of pent-up demand, especially within the travel industry. Airlines and hotels are seeing substantial increases in reservations for travel beginning in the Spring. 

SUPPLY CHAIN ISSUES
For those businesses making products, consumer demand is not always being met because of a backlog of cargo containers at different U.S. shipping ports. As of January 25th, the Wall Street Journal reported that there are more than one hundred ships in queue waiting to be unloaded at two ports in California alone. In addition, one-third of the ships that have reached the Los Angeles port are not being unloaded because there is no room on the docks to unload the cargo containers. This is because there are not enough truck drivers to haul the previously unloaded containers on the dock away. This inefficiency has led to factories with no raw materials and stores with little or no inventory available to put on store shelves. This bottleneck continues to be a contributor to the existing inflation issue and is why it continues to be a primary issue that investors are facing.

CPI-Unadjusted Change
January 2021 – January 2022

Source: BUREAU OF LABOR STATISTICS

INFLATION RUNNING WILD 
In its most basic form, inflation occurs when the demand for a product or service remains high and the supply is not adequate to fulfil this need. As a result, the costs of the products rise. As of January 31st, CPI reached a 40-year high with an increase of 7.5% year over year. Even when you exclude food and energy core CPI rose 6.0%. That makes it the highest level on record since February 1982.

FED READY TO COMBAT INFLATION
The Fed admitted in their meeting notes that they are behind the curve when dealing with inflation. The inflationary spike that the committee previously called “transitory,” rose to levels not seen since 1982. The Fed states they are going to take substantial steps to correct the issue. They announced that the committee will be reducing all future asset purchases each month until they have stopped the monetary easing in early 2022. Once complete, they will begin tightening fiscal policy by raising short-term interest rates. According to a CME FedWatch, the market is currently pricing in a 75% likelihood of a 0.25% increase in the overnight lending rate in March 2022. Currently, the market is expecting there to be at least three interest rate hikes of 0.25% in 2022. Other investors think the Fed could be more aggressive and are pricing in the possibility of a 0.50% hike in March, followed by two more 0.25% hikes later in the year.

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2022 Meeder Investment Management, Inc.

0116-MAM-02/15/22

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • February 4, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Defensive ETF flows are nearing extreme

» Individual investors were most bearish since early 2020

  » Yield curve continues to flatten

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • January 21, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Interest rates moving higher 

» U.S. small-cap stocks breaking down

  » U.S. dollar performance during rate hikes 

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • January 7, 2022

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» 2021 had the second-most new S&P 500 highs ever

» Real earnings yield reaches historic low

  » Bond market indicates higher risk

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Capital Markets Commentary: 2022 Market Outlook
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer, and Amisha Kaus, Portfolio Manager • December 27, 2021

2021 was a year of transition for global capital markets. While countries have moved away from widespread economic shutdowns, 2021 brought the highest inflation we have experienced in decades, upward pressure on interest rates, supply chain challenges, and lackluster labor participation. Despite these challenges, equities recorded above-average gains with little volatility, while only certain pockets of the bond market were able to avoid negative returns.

 

AS WE TURN THE CORNER TO 2022, HERE ARE THE KEY THEMES FOR NEXT YEAR:

» Elevated equity market risk - Gains in 2022 may prove to be more challenging than in 2021, with elevated equity risk compared to the start of this year. While long-term uptrends are still in place for U.S. equities, we have seen a significant increase in the number of individual stocks that are in bear markets.

» Inflationary pressure should ease by the end of 2022 - We see early signs of improvement in the supply chain and labor market that may cause a reduction in inflation by the end of 2022.

» Federal Reserve stimulus timeline - We expect the Federal Reserve to finish tapering by the end of the first quarter of 2022, with the first increase in the Fed Funds rate to come before June 2022.

» Focus on tactical fixed income - Being tactical in fixed income will become even more important in 2022. With upward pressure on interest rates by the Fed, bond investors will need to tactically allocate to areas outside of traditional investment grade and U.S. Treasuries.

» COVID-19 likely to become an increasingly manageable risk – While predicting the future path of infection is not something we can predict, we enter the new year with multiple vaccines in place, more education on how the virus spreads, and knowledge of methods to manage the spread without widespread economic shutdowns.

 

ELEVATED EQUITY MARKET RISK
The S&P 500 reached a historic milestone in 2021, achieving its fastest start to a bull market since at least 1950, eclipsing the earlier record made just after the Great Financial Crisis. In just 354 trading days, the S&P 500 Index gained more than 100% off its March 2020 bottom.

Although the trend of U.S. equities is positive, there has been a lack of participation during the second half of 2021. As shown in Exhibit 1, the percentage of Russell 3000 stocks that are 20% or more below their 52-week high (a classic definition of a bear market) has been climbing and sits right around 50%. This weakness under the surface is a concern.

EXHIBIT 1: THE PERCENTAGE OF U.S. STOCKS IN BEAR MARKETS HAS BEEN INCREASING SINCE JULY

Source: S&P Capital IQ

Inflation-adjusted valuations have also reached an extreme level. The S&P 500’s real earnings yield (Earnings Yield – CPI (Consumer Price Index) YOY Growth Rate) is at its lowest level going back to 1957. In the past, we have argued that the high valuation of U.S. equities has been warranted due to below average inflation, record-low interest rates, and favorable corporate and investment tax rates. While inflation may begin to subside during the second half of 2022, the government spending and current tax rates that have been a tailwind for equities are likely to reverse course in the next few years.

 

EXHIBIT 2: THE S&P 500’S REAL EARNINGS YIELD HAS MOVED TO ITS LOWEST LEVEL SINCE AT LEAST 1953

Source: Bloomberg

Despite these concerns, the long-term trend is still positive and strong uptrends do not historically reverse easily. In fact, since 1950, when the S&P 500 gains more than 20%, the following year has been positive 84% of the time, with an average gain of 11.5%. Given the increased level of risk, tactically monitoring momentum will be especially important as we navigate 2022.

EXHIBIT 3: ANNUAL RETURNS OF >20% HAVE HISTORICALLY LED TO MORE UPSIDE THE FOLLOWING YEAR

Source: Bloomberg

 

INFLATIONARY PRESSURE SHOULD EASE BY THE END OF 2022
Inflation took center stage in 2021, with the US Personal Consumption Expenditure (PCE) Index growing at a 5.7% YOY growth in November, its highest level since the early 1980s. A combination of massive fiscal-stimulated consumer demand, global supply chain issues, and lackluster labor participation have all been contributors.

While international part shortages continuing to cause delays in completing customer orders, we have begun to see an improvement in the size of U.S. inventories compared to new orders since August. While average supplier delivery time is still elevated, this could be a sign that manufacturers are catching up with consumer demand.

EXHIBIT 4: INVENTORIES ARE CATCHING UP WITH NEW ORDERS, WHICH MAY IMPROVE SUPPLY CHAIN ISSUES

Source: Bloomberg

We are not likely to see the same level of consumer demand again in 2022. As shown in Exhibit 5, the massive consumer savings in the U.S. has sharply declined and is down to its pre-pandemic level.

EXHIBIT 5: SAVINGS HAS DECLINED TO PRE-PANDEMIC LEVELS

Source: Bloomberg

In addition, the record amount of fiscal stimulus that bolstered the balance sheets of Americans in 2021 will not be occurring in 2022. In Exhibit 6, the stark contrast between total US Personal Income and US Personal Income excluding Federal benefits shows that Americans received more income than they would have if there was no pandemic. U.S. Personal Income has since declined to a level consistent with its historical trend. With savings and income back to normal levels, we expect to see a decline in consumer demand and an improvement in the labor participation rate by the end of 2022.

EXHIBIT 6: INCOME HAS DECLINED WITH THE EXPIRATION OF MOST FEDERAL BENEFITS

Source: Bloomberg

 

WE EXPECT THE FED TO FINISH TAPERING BY THE END OF Q1 2022, WITH THE FIRST INCREASE IN THE FED FUNDS RATE TO COME BEFORE JUNE 2022
We expect the Federal Reserve to end their COVID-related monetary stimulus by March 2022, giving the committee more flexibility to raise federal funds rate during the second quarter of 2022. We expect the first fed funds rate increase shortly after the March FOMC meeting, followed by two more rate increases during 2022. This should bring the central bank’s lending rate to just under 1% by the end of 2022. We expect this monetary tightening cycle to continue well into 2024.

The Federal Reserve's dual-mandate includes both stable prices and maximum employment. The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditure (PCE) Core Index, which excludes food and energy prices, currently stands at 4.7%, well above their long-term target of 2%. Despite inflation running well above its target, a key factor in gauging the central bank’s aggressiveness in raising rates continues to be the labor market. The U.S. unemployment rate reached a high of 14.8% during the height of the pandemic last year and has since gradually declined to the current level of 4.2%. The U.S. central bank expects the unemployment rate to drop to 3.5% in 2022, which will also put more pressure on the committee to move rates higher next year.

EXHIBIT 7: FURTHER IMPROVEMENT IN THE LABOR MARKET SHOULD ALLOW THE FED TO BEGIN A TIGHTENING CYCLE

Source: Bloomberg

 

WITH INTEREST RATES FACING UPWARD PRESSURE FOR THE FIRST TIME IN YEARS, HAVING A TACTICAL APPROACH TO FIXED INCOME WILL BECOME EVEN MORE IMPORTANT FOR INVESTORS
This year’s rising rate environment has been difficult for fixed income sectors, with many asset classes experiencing negative returns. U.S. Treasury yields spiked along with inflation expectations at the beginning of the year as the economy reopened and fixed income sectors suffered a sharp drop in returns. The 2-year U.S. Treasury’s total return is -0.45% so far this year and will likely close the year with a negative return, marking its first annual loss in more than 30 years. Lower credit quality and shorter-duration bond sectors have outperformed the broad fixed income market during this period of rate uncertainty.

EXHIBIT 8: 2021 CREATED CHALLENGES FOR LONG-TERM INVESTMENT GRADE & TREASURY INVESTORS

Source: Bloomberg

Lower credit quality sectors like bank loans or high yield bonds provide higher income and better performance during the interest rate volatility. In fact, Meeder’s overweight position to the high yield sector during the first part of 2021 protected the portfolio from the widespread drawdown at the beginning of 2021.

While our portfolios reduced lower credit quality exposure during the fourth quarter due to higher volatility and credit spread widening, we believe that overall credit fundamentals for high yield bonds remain strong. Default rates and credit spreads for high yield bonds continue to remain at historic lows, while the balance sheets for lower credit quality companies have improved due to cheaper debt refinancing. We believe this scenario is favorable for tactical positioning in high yield bonds in 2022. Tactical positioning in lower credit quality sectors along with a tactical duration strategy can provide more opportunities to improve total return in the current rate environment.

 

COVID-19 LIKELY TO BECOME AN INCREASINGLY MANAGEABLE RISK
Almost two years into the pandemic, various strains of the COVID-19 virus have claimed more than five million lives and affected billions more. As shown on Exhibit 9, we are currently amid another rise in cases related to the omicron variant, the most since the rise in the delta variant during Q3 of 2021.

EXHIBIT 9: OMICRON VARIANT HAS CAUSED A RECENT SPIKE IN CASES IN THE U.S. AND E.U.

Source: Our World in Data

In early results, the current vaccines appear to have lower vaccine effectiveness compared to the delta infection but are still moderate to high at 70 to 75%. While we are in no way infectious disease experts, there are reasons to be hopeful that, as time passes, this risk should become
more manageable.

» Pandemics historically do not die and go away, but they do fade away. Whether it is the Spanish Flu from 1918, SARS in 2003, or MERS in 2012, eventually the combination of immunity from surviving an infection or receiving a vaccination lessen the spread and severity of the virus
over time.

» We have multiple vaccines widely available, with the ability to adjust as variations of the virus appear, like how we tackle the seasonal influenza each year.

» Countries have learned more about managing the spread of COVID-19 that was not known at the beginning of 2020, making the potential of another widespread economic lockdown a low possibility.

 

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2021 Meeder Investment Management, Inc.

0116-MAM-12/23/21-18797

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • December 27, 2021

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» A large amount of U.S. stocks are in bear markets

» 2022 will bring higher short-term rates

  » Key drivers of inflation will subside in 2022

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • December 10, 2021

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Long-term market breadth continues to struggle

» Yield curve starting to flatten

   » Inventories trying to keep with sales

 

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • November 29, 2021

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» Big reversal lower in November for stocks

» Interest rates climb as Powell reappointed

» New high in airline travelers ahead of new COVID-19 variant

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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Capital Markets Commentary: Stocks Rebound in October as Fed and Inflation Take Center Stage
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • As of October 31, 2021

U.S. EQUITY MARKETS
After markets struggled during the month of September, most major asset classes rebounded strongly in October and left the S&P 500’s first 5% pullback in 2021 a distant memory for many investors. In fact, the S&P 500 Index (SPX) rallied 7.0%, the S&P 400 Mid Cap Index (MID) gained 5.9% and the Russell 2000 Index moved higher by 4.3%. While international equities underperformed their domestic counterparts, the MSCI EAFE Developed International ex-US Index and MSCI EM Index still posted profits of +2.5% and +1.0% respectively.

Growth stocks outperformed value stocks by 2.1% over the month, with U.S. technology companies outperforming most. Coinciding with growth outperformance, long-term interest rates continued to climb higher for most of the month, weighing on global fixed income markets.

 

THE FED IMPACT
The Fed has begun to slow its bond-buying program and it appears the first Fed rate hike will occur in mid-2022 due to stronger than expected inflation readings. On a monthly basis, the reduction will see $10 billion less in Treasuries and $5 billion less in mortgage-backed securities.

There has also been a slight change in the Fed’s view on inflation. The post-meeting statement kept the word “transitory” to describe price increases that are running at a 30-year high, though it qualified the term somewhat by saying pressures are “expected” to be temporary. Chairman Powell also says that he expects conditions pushing inflation to last “well into next year.”

While the U.S. fiscal and monetary tailwinds are expected to be reduced next year, U.S. household balance sheets remain stronger than pre-pandemic levels, corporations are holding a lot of cash, and there remain significant amounts of unspent federal monies in the U.S. economy.

 

COVID-19 STILL LOOMS LARGE OVER THE U.S. ECONOMY
Despite COVID-19 cases continuing to decline globally throughout the month of October, the impact of the rise in cases in August and September has still affected many parts of the U.S. economy, including supply chain and labor shortages, along with weaker-than-expected consumer spending during the past few months.

Based on initial estimates, the U.S. economy expanded 2.0% over the third quarter of 2021, which was lower than the 2.6% expected. Specifically, vehicle purchases dropped 54% on the back of additional semi-conductor shortages. Global labor shortages continue to impact businesses and the prices of goods and services.

 

STRONG EARNINGS SEASON
As the month of October came to an end, the U.S. earnings season was in full motion and reports were mostly positive. As of the end of October, a little over one-half of U.S. public companies had reported their earnings and over 80% had exceeded market expectations. That is one of the best starts to a U.S. earnings season in years and, overall, corporate earnings have been around 9.5% higher than forecasted.

 

 

The views expressed herein are exclusively those of Meeder Investment Management, Inc., are not offered as investment advice, and should not be construed as a recommendation regarding the suitability of any investment product or strategy for an individual’s particular needs. Investment in securities entails risk, including loss of principal. Asset allocation and diversification do not assure a profit or protect against loss. There can be no assurance that any investment strategy will achieve its objectives, generate positive returns, or avoid losses.

Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios, or holdings are given as of the date provided and are subject to change at any time. No offer to sell, solicitation, or recommendation of any security or investment product is intended. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties.

Investment advisory services provided by Meeder Asset Management, Inc.

©2021 Meeder Investment Management, Inc.

0116-MAM-11/16/21-14029

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Markets in Focus
By Joe Bell, CFA, CMT, CFP, Chief Investment Officer • November 12, 2021

CLICK ON THE VIDEO BELOW TO WATCH

 

KEY TAKEAWAYS 

» High inflation continues in October

» U.S. small-caps finally break out

» S&P 500 nearing most new highs ever

 

 

IMPORTANT DISCLOSURES:
Commentary offered for informational and educational purposes only. Opinions and forecasts regarding markets, securities, products, portfolios or holdings should not be construed as predictions or recommendations.  All information is given as of the date shown and is subject to change at any time. Nothing herein should be construed as an offer to sell, solicitation, or recommendation of any security or investment product. Certain information and data has been supplied by unaffiliated third parties as indicated. Although Meeder believes the information is reliable, it cannot warrant the accuracy, timeliness or suitability of the information or materials offered by third parties. 
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