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There were bright spots elsewhere as well. European stocks rose nearly 8 percent for the month, despite concerns over Italy’s economic and political health and rising fears of a natural gas shortage heading into winter. In corporate bond markets, the debt of riskier, “junk”-rated companies returned over 5 percent, according to an index run by Bloomberg, which had its best one-month performance since October 2011.
Yet despite the strong performance, some investors remain wary, cautioning that the recent rally could unwind itself just as quickly.
“I think we are going to go through a tough time in the second half of the year, where the economic data continues to show growth eroding and inflation might not come down as fast as people are hoping,” said David Donabedian, chief investment officer of CIBC’s U.S. private wealth business.
The move higher is a reflection that the current round of updates from corporate America are not as bad as feared, which is different than those results being good. Investors pushed the S&P 500 down over 8 percent in June, ahead of the current crop of earnings results, and the index remains around 14 percent below its peak in January.
Some investors also said that there is a willingness to keep buying stocks while inflation is so high because other, safer assets do not offer the returns that allow them to defend against the eroding effect of rising prices.
“I am not as sanguine as the market seems to be,” said Lauren Goodwin, an economist at New York Life Investments. “But running for the hills when inflation is so high is just a drag on returns. We have to stay invested.”
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