In the first half of the year, we experienced three of the top four bank failures ever and a contentious fight over raising the debt limit. Regardless, the S&P 500 is up 16.89% through the end of June. The anticipated recession has yet to unfold and the average expected return for the S&P 500 for the full year was 4.5%‐5%. As noted in previous outlooks, this environment seems more difficult to rely on historical norms for predicting economic and market outcomes. While we have seen many economic factors weaken, employment has held up extremely well, allowing for households to keep spending (especially on services). Government spending is still above pre‐Covid trend and manufacturing construction is up significantly. The lag effect of rising interest rates are just now starting to filter its way into the economy. The Fed has indicated that they are willing to push rates above the current 5%‐5.25% level in order to get inflation down to a 2% target. Expectations were that it would take a recession to achieve that goal. Currently the odds of the Fed pulling off a soft‐landing are increasing.

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