The average price of gasoline in the U.S. hovers at $4.80 a gallon, air transportation is bedeviled by chaos, and the cost of lodging is soaring.

The equation adds up to a “staycation” for the Persinos clan this summer. Staying close to home is exactly what we did last weekend for the three-day July 4 holiday. We gathered for a backyard picnic, where we set off fireworks and endured my dubious skills at barbecuing.

There’s no escaping the ravages of inflation, though. Inflation is dampening consumer sentiment and causing millions of other Americans to rethink their spending plans for the summer.

The Conference Board reported on June 28 that its Consumer Confidence Index fell in June, following a slump in May. The Index declined to 98.7, down 4.5 points from 103.2 in May, and currently stands at its lowest level since February 2021.

The sub-index on expectations, based on consumers’ short-term outlook for income, business, and labor market conditions, fell sharply to 66.4 from 73.7 and is now at its lowest level since March 2013.

As the second half of 2022 gets underway, the equity, bond, and commodities markets are signaling that slower economic growth lays ahead.

The S&P 500 index closed out the first half of 2022 down 20.6%, to officially land in bear territory. That’s one of the loudest signals that a recession could be pending. Since 1950, about 70% of bear markets were concomitant with recessions.

A rally on Friday, July 1, wasn’t enough to lift U.S. stocks into the plus column for the week (see table).

Whereas bond yields had moved sharply higher for the majority of the year, in recent days we’ve witnessed yields moving lower. Notably, the 10-year U.S. Treasury yield hit a high of about 3.5% in early June but ended the second half of 2022 at about 3.0%. This downward trend in yields is probably driven by worries about future economic growth, as well as a flight to safety by investors.

Read This Story: Do Investors Face a Great Reckoning?

It pays to keep an eye on the bond market, which represents a collective wisdom about the future direction of not just bonds but also stocks.

In addition to yields moving lower, the yield curve (the difference between the 10-year and two-year yield) has flattened. Analysts typically view this shrinking of the gap between yields on shorter-term Treasuries and those maturing further out as a warning that economic growth is in jeopardy.

Which brings us to commodities. The prices of many economically sensitive raw materials, such as copper, slipped in June, another signal that economic growth is sputtering. The good news here is that the trend of falling commodities prices helps take the momentum out of inflation. Crude oil prices may prove more buoyant, however, due to the exceptional circumstances of the Russia-Ukraine war.

Economic data are indeed softening. If a full-blown recession isn’t in the cards, we at least face a downturn that will continue to weigh on stocks.

A sector for all seasons…

But keep in mind, as surely as spring follows winter, bear markets are followed by bull markets. And historically, bull markets tend to last longer, and they’re more powerful, than bear markets.

Since 1950, the average bear market has lasted 11 months and returned -34%, whereas the average bull market has lasted 15 months and returned +167%.

Be patient. Don’t exit the market. Despite the risky conditions I’ve just described, dividend-paying utilities stocks can provide income and relative safety. Indeed, in the second half of 2022, as the S&P 500 fell by more than 20%, utilities only declined by -2.0%, the second best sector performance (after energy).

Utilities are “essential services” and as such, they’re recession resistant. When picking these stocks, we look for companies with rock-solid balance sheets, and high earnings growth that will drive strong dividend growth. For our “dividend map” of the best utilities stocks to buy, click here now.

John Persinos is the editorial director of Investing Daily. He also edits our premium publication devoted to utilities stocks, Utility Forecaster.

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