Category Archives: The “Heat Map”

The Numbers & “Heat Map”

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THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. Real GDP for Q2 2022 decreased at an annual rate of 0.9% marking the second consecutive quarter of declining GDP.

CORPORATE EARNINGS

NEUTRAL

 The estimated growth rate for Q2 2022 is now 6.7% (up from 4.3%) which would mark a new post-pandemic low; but still solidly in the “growth” stage. 87% of S&P500 companies have now reported earnings — 75% beat earnings estimates and 70% reported actual revenue above expectations. For Q3, 42 companies issued negative EPS guidance while 30 companies issued positive guidance.

EMPLOYMENT

POSITIVE

 U.S. Nonfarm Payrolls for July 2022 increased by a stunning 528,000 new jobs compared to economist’s estimates of 250,000. The latest unemployment rate for July came in at 3.5%, nearing a record low. Employment activity and job growth continues to impress everyone while also confounding everyone as GDP is slowing at the same time.

INFLATION

NEGATIVE

 The annual inflation rate in the US increased by 8.5% for July 2022. The gasoline index fell 7.7% and the energy index fell 4.6% which offset the increases in food and shelter indexes. The PPI decreased 0.5% in July and registered a year-over-year gain of 9.8%

FISCAL POLICY

NEUTRAL

 Senator Manchin and Majority Leader Schumer reached an agreement on the latest tax and energy bill. The bloated bill is stacked with incentives for green energy, EV cars, and conversely oil & gas companies for exploration. Further, no changes in private equity taxes or higher tax rates for the very wealthy were enacted. The bill has been officially passed by the Senate.

MONETARY POLICY

NEUTRAL

 The current target for Fed Funds is a range of 2.25% to 2.5%. With inflation still running hot, Fed Chairman Jay Powell is clear on his path to slow the economy enough to cool inflation. The next Fed meeting is September 20-21 and markets are pricing in another 0.50-0.75% increase in short-term rates.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of late June for the first time since1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions. On a good note – Israel and Turkey have restored diplomatic ties and will be exchanging ambassadors again after four years. This should result in a significant improvement in regional stability.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. Real GDP for Q2 2022 decreased at an annual rate of 0.9% marking the second consecutive quarter of declining GDP.

CORPORATE EARNINGS

NEUTRAL

 The estimated growth rate for Q2 2022 is now 6.7% (up from 4.3%) which would mark a new post-pandemic low; but still solidly in the “growth” stage. 87% of S&P500 companies have now reported earnings — 75% beat earnings estimates and 70% reported actual revenue above expectations. For Q3, 42 companies issued negative EPS guidance while 30 companies issued positive guidance.

EMPLOYMENT

POSITIVE

 U.S. Nonfarm Payrolls for July 2022 increased by a stunning 528,000 new jobs compared to economist’s estimates of 250,000. The latest unemployment rate for July came in at 3.5%, nearing a record low. Employment activity and job growth continues to impress everyone while also confounding everyone as GDP is slowing at the same time.

INFLATION

NEGATIVE

 The annual inflation rate in the US increased by 8.5% for July 2022. The gasoline index fell 7.7% and the energy index fell 4.6% which offset the increases in food and shelter indexes. The PPI decreased 0.5% in July and registered a year-over-year gain of 9.8%

FISCAL POLICY

NEUTRAL

 Senator Manchin and Majority Leader Schumer reached an agreement on the latest tax and energy bill. The bloated bill is stacked with incentives for green energy, EV cars, and conversely oil & gas companies for exploration. Further, no changes in private equity taxes or higher tax rates for the very wealthy were enacted. The bill has been passed by the Senate last week.

MONETARY POLICY

NEUTRAL

 The current target for Fed Funds is a range of 2.25% to 2.5%. With inflation still running hot, Fed Chairman Jay Powell is clear on his path to slow the economy enough to cool inflation. The next Fed meeting is September 20-21 and markets are pricing in another 0.50-0.75% increase in short-term rates.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of Sunday, June 26th when the 30-day grace period on $100 million of interest payments expired. This is the first Russian default since 1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. Real GDP for Q2 2022 decreased at an annual rate of 0.9% marking the second consecutive quarter of declining GDP.

CORPORATE EARNINGS

NEUTRAL

 The estimated growth rate for Q2 2022 is now 6.0% (up from 4.3%) which would mark a new post-pandemic low; but still solidly in the “growth” stage. 56% of S&P500 companies have now reported earnings — 73% beat earnings estimates and 66% reported actual revenue above expectations. For Q3, 28 companies issued negative EPS guidance while 17 companies issued positive guidance.

EMPLOYMENT

POSITIVE

 U.S. Nonfarm Payrolls for July 2022 increased by a stunning 528,000 new jobs compared to economist’s estimates of 250,000. The latest unemployment rate for July came in at 3.5%, nearing a record low. Employment activity and job growth continues to impress everyone while also confounding everyone as GDP is slowing at the same time.

INFLATION

NEGATIVE

 The annual inflation rate in the US accelerated to 9.1% in June, the highest since November 1981,from 8.6% in May and above forecasts of 8.8%. Core CPI increased by 5.9%, slightly below 6% in May, but above forecasts of 5.7%. The increase in CPI was driven by major surges in food and energy prices, as food costs rose by 10.4% and energy prices by 41.6%.

FISCAL POLICY

NEUTRAL

 Senator Manchin and Majority Leader Schumer reached an agreement on the latest tax and energy bill. The bloated bill is stacked with incentives for green energy, EV cars, and conversely oil & gas companies for exploration. Further, no changes in private equity taxes or higher tax rates for the very wealthy were enacted.

MONETARY POLICY

NEUTRAL

 The current target for Fed Funds is a range of 2.25% to 2.5%. With inflation still running hot, Fed Chairman Jay Powell is clear on his path to slow the economy enough to cool inflation. The next Fed meeting is September 20-21 and markets are pricing in another 0.50-0.75% increase in short-term rates.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of Sunday, June 26th when the 30-day grace period on $100 million of interest payments expired. This is the first Russian default since 1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. Real GDP for Q2 2022 decreased at an annual rate of 0.9% marking the second consecutive quarter of declining GDP.

CORPORATE EARNINGS

NEUTRAL

 The estimated growth rate for Q2 2022 is now 6.0% (up from 4.3%) which would mark a new post-pandemic low; but still solidly in the “growth” stage. 56% of S&P500 companies have now reported earnings — 73% beat earnings estimates and 66% reported actual revenue above expectations. For Q3, 28 companies issues negative EPS guidance while 17 companies issued positive guidance.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 370,000 in June and the unemployment rate remained constant at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, and transportation and warehousing. Employment in retail trade declined.

INFLATION

NEGATIVE

 The annual inflation rate in the US accelerated to 9.1% in June, the highest since November 1981, from 8.6% in May and above forecasts of 8.8%. Core CPI increased by 5.9%, slightly below 6% in May, but above forecasts of 5.7%. The increase in CPI was driven by major surges in food and energy prices, as food costs rose by 10.4% and energy prices by 41.6%.

FISCAL POLICY

NEUTRAL

 Senator Manchin and Majority Leader Schumer reached an agreement on the Inflation Reduction Act last Wednesday. If enacted, the bill will provide significant incentives to cut carbon emissions and promote renewable energy. It will also result in the largest increase in corporate tax in decades.

MONETARY POLICY

NEUTRAL

 Last week the Fed hiked rates by 75 basis points, raising their target to a range of 2.25% to 2.5%. This decision had unanimous agreement by the 12 members of the rate-setting committee. In a statement, members of the committee acknowledged a slowdown in the economy over the last month in terms of spending and production despite strong jobs gains.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of Sunday, June 26th when the 30-day grace period on $100 million of interest payments expired. This is the first Russian default since 1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. The July 2022 University of Michigan Consumer Sentiment (Confidence) Index hit 51, a level not seen since 2009 during the GFC, but up slightly from the June Index level of 50, an encouraging sign.

CORPORATE EARNINGS

NEUTRAL

 The earnings growth rate for Q1 2022 was 9.2% — the lowest since Q4 2020 (3.8%). This estimate was revised upward from the previous forecast of 7.1% in April. All S&P500 companies have reported earnings — 77% reported a positive EPS surprise and 73% beat revenue expectations. The estimated growth rate for Q2 2022 is now 4.3% which would mark a new post-pandemic low; but still solidly in the “growth” stage.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 370,000 in June and the unemployment rate remained constant at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, and transportation and warehousing. Employment in retail trade declined.

INFLATION

NEGATIVE

 The annual inflation rate in the US accelerated to 9.1% in June, the highest since November 1981, from 8.6% in May and above forecasts of 8.8%. Core CPI increased by 5.9%, slightly below 6% in May, but above forecasts of 5.7%. The increase in CPI was driven by major surges in food and energy prices, as food costs rose by 10.4% and energy prices by 41.6%.

FISCAL POLICY

NEUTRAL

 President Biden, who is suffering from his lowest approval ratings of his term, is recovering from COVID and is likely to come out of quarantine early this week; on Capitol Hill, it is the penultimate week to make progress on the Democrats’ (beleaguered) legislative agenda before Congress breaks for summer recess and things go dark until after Labor Day.

MONETARY POLICY

NEUTRAL

 The FOMC meets this week and futures markets are pricing in an 80% chance of a 0.75 basis point rate hike at the meeting. Watch for Chairman Jay Powell press conference for any new direction the Fed may hint at taking.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of Sunday, June 26th when the 30-day grace period on $100 million of interest payments expired. This is the first Russian default since 1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. The July 2022 University of Michigan Consumer Sentiment (Confidence) Index hit 51, a level not seen since 2009 during the GFC, but up slightly from the June Index level of 50, an encouraging sign.

CORPORATE EARNINGS

NEUTRAL

 The earnings growth rate for Q1 2022 was 9.2% — the lowest since Q4 2020 (3.8%). This estimate was revised upward from the previous forecast of 7.1% in April. All S&P500 companies have reported earnings — 77% reported a positive EPS surprise and 73% beat revenue expectations. The estimated growth rate for Q2 2022 is now 4.3% which would mark a new post-pandemic low; but still solidly in the “growth” stage.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 370,000 in June and the unemployment rate remained constant at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, and transportation and warehousing. Employment in retail trade declined.

INFLATION

NEGATIVE

 The annual inflation rate in the US accelerated to 9.1% in June, the highest since November 1981, from 8.6% in May and above forecasts of 8.8%. Core CPI increased by 5.9%, slightly below 6% in May, but above forecasts of 5.7%. The increase in CPI was driven by major surges in food and energy prices, as food costs rose by 10.4% and energy prices by 41.6%.

FISCAL POLICY

NEUTRAL

 After passing a $13.6 billion package to support Ukraine a few weeks ago, the House approved an additional $40 billion military and humanitarian package for Ukraine. The bill was passed with 368 votes against 57 votes. The total of the two packages ($53 billion) is the largest foreign aid moved through Congress in over 20 years.

MONETARY POLICY

NEUTRAL

 The Fed responded to the persistent inflation numbers by raising rates by 75 basis points, the highest hike since November 1994. The next decisions by the Fed will be data-driven based on future inflation numbers and estimated economic growth, but Fed Funds Futures are currently pricing in a 75 basis point rate hike.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of Sunday, June 26th when the 30-day grace period on $100 million of interest payments expired. This is the first Russian default since 1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. This is the first contraction since the beginning of the pandemic. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. This may be an indication that the U.S. economy has recovered faster than other countries.

CORPORATE EARNINGS

NEUTRAL

 The earnings growth rate for Q1 2022 was 9.2% — the lowest since Q4 2020 (3.8%). This estimate was revised upward from the previous forecast of 7.1% in April. All S&P500 companies have reported earnings — 77% reported a positive EPS surprise and 73% beat revenue expectations. The estimated growth rate for Q2 2022 is now 4.3% which would mark a new post-pandemic low; but still solidly in the “growth” stage.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 370,000 in June and the unemployment rate remained constant at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, and transportation and warehousing. Employment in retail trade declined.

INFLATION

NEGATIVE

 CPI rose 8.6% year-over-year in May 2022, the largest increase since December 1981. Core CPI recorded a 6.0% increase (down slightly from April). The increase in CPI was driven by energy, food, and shelter. After declining in April, energy increased by 3.9% over May and gasoline rose by 4.1%.

FISCAL POLICY

NEUTRAL

 After passing a $13.6 billion package to support Ukraine a few weeks ago, the House approved an additional $40 billion military and humanitarian package for Ukraine. The bill was passed with 368 votes against 57 votes. The total of the two packages ($53 billion) is the largest foreign aid moved through Congress in over 20 years.

MONETARY POLICY

NEUTRAL

 The Fed responded to the persistent inflation numbers by raising rates by 75 basis points, the highest hike since November 1994. Powell mentioned that another 50 to 75 bps hike is likely for July. The next decisions by the Fed will be data-driven based on future inflation numbers and estimated economic growth.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of Sunday, June 26th when the 30-day grace period on $100 million of interest payments expired. This is the first Russian default since 1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. This is the first contraction since the beginning of the pandemic. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. This may be an indication that the U.S. economy has recovered faster than other countries.

CORPORATE EARNINGS

NEUTRAL

 The earnings growth rate for Q1 2022 was 9.2% — the lowest since Q4 2020 (3.8%). This estimate was revised upward from the previous forecast of 7.1% in April. All S&P500 companies have reported earnings — 77% reported a positive EPS surprise and 73% beat revenue expectations. The estimated growth rate for Q2 2022 is now 4.3% which would mark a new post-pandemic low.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 390,000 in May and the unemployment rate remained constant at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, and transportation and warehousing. Employment in retail trade declined.

INFLATION

NEGATIVE

 CPI rose 8.6% year-over-year in May2022, the largest increase since December 1981. Core CPI recorded a 6.0% increase (down slightly from April). The increase in CPI was driven by energy, food, and shelter. After declining in April, energy increased by 3.9% over May and gasoline rose by 4.1%.

FISCAL POLICY

NEUTRAL

 After passing a $13.6 billion package to support Ukraine a few weeks ago, the House approved an additional $40 billion military and humanitarian package for Ukraine. The bill was passed with 368 votes against 57 votes. The total of the two packages ($53 billion) is the largest foreign aid moved through Congress in over 20 years.

MONETARY POLICY

NEUTRAL

 The Fed responded to the persistent inflation numbers by raising rates by 75 basis points, the highest hike since November 1994. Powell mentioned that another 50 to 75 bps hike is likely for July. The next decisions by the Fed will be data-driven based on future inflation numbers and estimated economic growth.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia has defaulted on its debt as of Sunday, June 26th when the 30-day grace period on $100 million of interest payments expired. This is the first Russian default since 1918. Sanctions imposed by Western powers effectively isolated Russia and its financial system from Europe and the U.S. making it much harder for Russia to complete international financial transactions.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian- Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

Posted on by

THE NUMBERS
The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. This is the first contraction since the beginning of the pandemic. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. This may be an indication that the U.S. economy has recovered faster than other countries.

CORPORATE EARNINGS

NEUTRAL

 The earnings growth rate for Q1 2022 was 9.2% — the lowest since Q4 2020 (3.8%). This estimate was revised upward from the previous forecast of 7.1% in April. All S&P500 companies have reported earnings — 77% reported a positive EPS surprise and 73% beat revenue expectations. The estimated growth rate for Q2 2022 is now 4.0% which would mark a new post-pandemic low.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 390,000 in May and the unemployment rate remained constant at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, and transportation and warehousing. Employment in retail trade declined.

INFLATION

NEGATIVE
CPI rose 8.6% year-over-year in May2022, the largest increase since December 1981. Core CPI recorded a 6.0% increase (down slightly from April). The increase in CPI was driven by energy, food, and shelter. After declining in April, energy increased by 3.9% over May and gasoline rose by 4.1%.

FISCAL POLICY

NEUTRAL

 After passing a $13.6 billion package to support Ukraine a few weeks ago, the House approved an additional $40 billion military and humanitarian package for Ukraine. The bill was passed with 368 votes against 57 votes. The total of the two packages ($53 billion) is the largest foreign aid moved through Congress in over 20 years.

MONETARY POLICY

NEUTRAL

 The Fed raised rates by the expected 25 bps in March and 50 bps in May. Jay Powell projected a clear path for 2022 with as many as five additional rate hikes. The next decisions by the Fed will be data-driven based on future inflation numbers and estimated economic growth.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia was able to avoid default so far by making the required payment on its debt however, the U.S. has imposed additional sanctions barring Russia from using U.S. banks to make debt payments. The next coupons worth $400 million will be due on June 23rd and 24th and Russia is trying to leverage resources outside the Western financial infrastructure to make these payments.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian-Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Numbers & “Heat Map”

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THE NUMBERS
The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEUTRAL

 Q1 2022 Real GDP shrunk at a 1.5% annual rate according to the second estimate. This is the first contraction since the beginning of the pandemic. The main factors that resulted in a decrease in GDP were a surge in imports and trade deficit highlighting that the U.S. is buying more goods from foreign countries. This may be an indication that the U.S. economy has recovered faster than other countries.

CORPORATE EARNINGS

NEUTRAL

 The earnings growth rate for Q1 2022 was 9.2% — the lowest since Q4 2020 (3.8%). This estimate was revised upward from the previous forecast of 7.1% in April. All S&P500 companies have reported earnings — 77% reported a positive EPS surprise and 73% beat revenue expectations. The estimated growth rate for Q2 2022 is now 4.0% which would mark a new post-pandemic low.

EMPLOYMENT

POSITIVE

 Total nonfarm payroll employment rose by 390,000 in May and the unemployment rate remained constant at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, and transportation and warehousing. Employment in retail trade declined.

INFLATION

NEGATIVE
CPI rose 8.6% year-over-year in May2022, the largest increase since December 1981. Core CPI recorded a 6.0% increase (down slightly from April). The increase in CPI was driven by energy, food, and shelter. After declining in April, energy increased by 3.9% over May and gasoline rose by 4.1%.

FISCAL POLICY

NEUTRAL

 After passing a $13.6 billion package to support Ukraine a few weeks ago, the House approved an additional $40 billion military and humanitarian package for Ukraine. The bill was passed with 368 votes against 57 votes. The total of the two packages ($53 billion) is the largest foreign aid moved through Congress in over 20 years.

MONETARY POLICY

NEUTRAL

 The Fed raised rates by the expected 25 bps in March and 50 bps in May. Jay Powell projected a clear path for 2022 with as many as five additional rate hikes. The next decisions by the Fed will be data-driven based on future inflation numbers and estimated economic growth.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEGATIVE

 Russia was able to avoid default so far by making the required payment on its debt however, the U.S. has imposed additional sanctions barring Russia from using U.S. banks to make debt payments. The next coupons worth $400 million will be due on June 23rd and 24th and Russia is trying to leverage resources outside the Western financial infrastructure to make these payments.

ECONOMIC RISKS

NEUTRAL

 Supply chain disruptions in the U.S. are waning but the rising cost of oil due to the Russian-Ukraine war is likely to cause additional inflationary pressures not only on gasoline prices but also on many other goods and services. Starting in June, China has started to remove some restrictions in major cities to end the COVID-19 lockdown.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.