“Truly I tell you, whoever does not receive the kingdom of God like a little child will never enter it.” (Mark 10:15, CSB)
By this time in His earthly ministry, Jesus had become so popular that parents were bringing their children to Him for a moment of attention. But the disciples, viewing themselves as the gatekeepers to the Lord, became indignant and waved those families away. In turn, Jesus became indignant with them. How dare they presume to determine who was worthy of His attention! As a direct rebuke against them, he declared that only those who are child-like will receive the kingdom of God.
Many people that read this story assume that Jesus meant that only those who can develop a child-like INNOCENCE can become part of His kingdom. But that’s not it at all. You only need to spend a few minutes in a preschool to realize that our sinful nature manifests itself early in life! Instead, Jesus was pointing out that children are naturally DEPENDENT, knowing instinctively that they need what their parents have. Jesus was telling us that we can’t earn access to His kingdom. We must receive it from our heavenly Father, just like children receive what they need from their parents. We can do nothing to earn salvation. We are entirely dependent on God’s gracious nature.
Ironically, one of the marks of human maturity is the lessening of dependence on others. We consider young people mature when they can take care of themselves. But it’s the opposite for spiritual maturity. The more dependent we are on God, the more spiritually mature we become.
A holiday-shortened week saw bad news for the economy seemingly interpreted as good news for the market as investors digested Fed Chairman Powell’s hawkish testimony to Congress as well as the effects of the largest rate hike since 1994. The S&P 500®; Index ended the week at a gain while WTI and U.S. 10-year yields retreated. Other factors moving markets were the approaching month-end and quarter-end rebalancing flows, as well as Friday’s massive Russell index reconstitution. Taken together, last week’s price action felt like a bear market rally struggling to find footing after heavy selling thus far in June. The net effect of this slowing growth and tightening monetary policy was to reduce rate hike expectations, with the market pricing in the tightening cycle to be complete at around 3.5% by year-end and for rates to start falling again in 2023.
Shares in Europe broadly followed the strength found in U.S. markets by snapping a three-week losing streak. The broad rationale seemed to be the same across the pond as well – signs that a slowing economy would potentially curb aggressive central bank action. All core Eurozone markets rose around 1% to 3% while their bond yields fell on a weaker-than-expected Purchasing Managers Index (“PMI”) reading, which fell from 54.8 in May to 51.9 in June – its lowest level since February 2021. Consumer confidence in the Eurozone hit a level near the April 2020 low. Meanwhile, as the Russia/Ukraine war rages on, multiple countries, including Germany, Sweden, Denmark and Austria, announced plans to further reduce their reliance on Russian gas (with Romania reopening some coal plants). On Sunday, Russia technically went into default on a couple of bonds for the first time since 1918 as Western sanctions blocked the means to pay bondholders. In Asia, Japanese stocks advanced as core inflation (at 2.1%) topped the Bank of Japan’s 2% target while PMI data showed a strengthening of business activity in the services sector. Chinese stocks advanced on talks of stimulus hopes to counter the headwinds from the country’s zero-COVID policies. From an economic standpoint, the official index that tracks China’s apartment and home sales posted its 11th straight year-over-year monthly decline – its longest losing streak since China created a private property market in the 1990s. This property slump could prove to be a greater drag on their economy than even the recent lockdowns.
Signs of slowing growth abounded with the domestic data releases for the week. On Tuesday, the National Association of Realtors reported that existing home sales fell to their lowest level in May since June 2020 amidst the sharp increase in mortgage rates. The Chicago Federal Reserve also reported an eight-month low in its gauge of national economic activity. Thursday brought news that the S&P Global index of manufacturing activity came in materially below forecasts (52.4 vs. 56) while its services gauge also missed estimates and hit its lowest level since January. Parsing this data further, investors seemed to react favorably to the release because it showed manufacturing input inflation fell to its lowest level in five months while output charge inflation (the prices charged to consumers by companies) reached its lowest level since March 2021. Lastly, Friday brought the University of Michigan’s final reading of June consumer sentiment which showed the gauge at its lowest level ever (going back over four decades). On a positive note, this report also brought with it news that consumers’ inflation expectations were beginning to slightly moderate.
The Atlanta Fed’s GDPNow model estimate for U.S. real GDP growth for the second quarter of 2022 remained unchanged week-over-week at a flat 0.0%. The average consensus forecast remains just over 3%, while the range is about 1.5% to 4.5%. With the end of the quarter approaching quickly, one of these two measures must be incorrect, and we will get a glimpse of that in the ensuing weeks. Market observers are closely watching for a breach of the 0% threshold, as that would then be back-to-back quarters of negative GDP prints – something that has never occurred historically outside of a National Bureau of Economic Research-declared recession.
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