June 30 was the last trading day of the second quarter of 2022. The books are now closed on the second quarter and the first half of the year.

In the words of MAD magazine mascot Alfred E. Neuman: “Blecch.”

So far in 2022, U.S. stocks have shed more than $9 trillion in value. In the second quarter, the S&P 500 index fell 16.4%. The index plunged 20.6% in the first half, its worst first six months since 1970, when The Beatles called it quits. I still blame Yoko.

Can’t pin the stock market on her, though. The S&P 500’s sell-off during the first half of 2022 was brutal and broad-based. Among the 11 S&P 500 sectors, only energy posted a gain (+31.5%). The biggest loser in the first half was consumer discretionary (-32.5%). Soaring oil and gas prices have propelled the energy sector, whereas during economic slowdowns, consumers tend to pullback on purchases of discretionary items.

Many bellwether blue chips that form the foundation of traditional retirement portfolios have fallen further than the broader market. That’s particularly demoralizing for buy-and-hold investors who are in or near retirement. Bonds, which are supposed to provide ballast for portfolios, have posted a dismal six months as well.

The S&P 500 index has declined in 10 of the past 12 weeks, with bear market rallies in May and June that rapidly ran out of steam amid resurfacing worries about inflation, rising interest rates, possible recession, war in Eastern Europe, and decelerating corporate earnings growth. Another culprit for the downturn, of course, is the Federal Reserve’s hawkish monetary stance to quell inflation.

Hopeful signs on inflation…

Inflation stayed high in May, but the pace of cost increases is showing signs of leveling off, according to the personal consumption expenditures (PCE) price index, released Thursday by the Commerce Department.

Prices for goods and services rose 0.6% last month, or 6.3% from the previous year. In April, the figures were 0.2% and 6.3%, respectively.

Excluding volatile food and energy costs, prices jumped 0.3%, the same rate as the previous three months. Compared to a year ago, this so-called “core” PCE index climbed 4.7%. In April, it rose 4.9% (see chart).

The inflation readings in the core PCE rate from February through May were the smallest since the end of 2020. Based on these latest PCE readings, inflation may be peaking. What’s more, the personal saving rate rose to 5.4% in May, up from the 5.2% rate in the previous month.

Although the consumer-price index (CPI) is the best-known inflation indicator, it has two shortcomings: 1) It only tracks spending by urban consumers; and 2) it gathers data from household surveys, which can be unreliable.

Instead, the Fed uses the PCE, which is a much more expansive metric, to track prices paid for a basket of goods and services by consumers, employers, and federal programs. The PCE is calculated by collecting retail-sales data from businesses.

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Assets that supposedly provide hedges against recession and inflation have taken it on the chin, too. During the first half of 2022, Bitcoin (BTC), the granddaddy of cryptocurrencies, plunged more than 50% in value. Even the “safer” sector of health care fell by a sizable 8.3%.

Will investors finally get a respite, or will the pain continue for the second half? Second-quarter corporate earnings season will get underway in a few weeks, providing important clues as to whether the stock market will fall further or has the fuel to rebound. The market is forward-looking, so keep a close eye not just on Q2 scorecards, but also forward guidance.

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John Persinos is the editorial director of Investing Daily.

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