Good morning. My name is Chad Taylor, managing partner with MDT Financial Advisors here in Houston, Texas. Today is Tuesday, July the 11th and I wanted to get on and share a few slides with you that came out that I found interesting and talk about what's going on in the markets and the economies and things like that. I hope you're having a good summer at this point. July 4th came and I hope it was a good time for you. My wife and I, Jennifer, just this past weekend, we left last Friday afternoon, drove our daughter, Madison, from Houston to Cincinnati. She's starting with Cincinnati Ballet. She started yesterday with their trainee program there and so it was bittersweet, a long drive. If any of you know me, you know I hate to drive. And so we had to take a car up there so she could get around and it was a nice road trip.
We had a good time, pretty wore us out, but we made it and excited to see how she does there. So with that, I want to jump right in. This is our MDT markets minute that I do from time to time with some of the different things that are going on in the markets and the economy, and I appreciate you watching. This information is from our friends with the Well Fargo Investment Institute. Okay, so the first slide that I wanted to share was just a real where-are-we-today slide. There's a lot going on here, but I wanted to cover a few things. You can see there from the top left, it says the US stock market has rallied and you can see where it came down. Let me see if I can show. Here from the beginning of 2022, fell pretty heavily to the fall of 2022 and then since then, we've come up from there, but we still believe that it probably doesn't hurt to be cautious here that the stock market still could be vulnerable to some further setbacks from the lows of 2022, with elevated inflation is still the aggressive Federal Reserve monetary policy.
They didn't raise rates here in June, but they're still talking about raising rates and is there going to be a recession or not? I had a conversation this morning with someone and they were saying that we keep reading from Wells Fargo advisors that you think there's a recession. Other people are saying they don't think there's a recession, so which is it? And that's always the question. No one knows for sure short-term what's going to happen. Recessions happen from time to time. In my 25 years in the business, I've seen, what, probably four recessions in markets that play off of that. So you've got to keep an eye. It probably doesn't hurt to be cautious here. And when you look at some of the returns of the market this year, if you've noticed, the Dow Jones is up a little bit, 2%, 3%, 4% depending on where we are that day. The S&P is up more, but really, it's very narrow.
And so if you just put equal weighting in every stock in the S&P500, the return's not up very much. In fact, it was negative as of a month ago, but because of how they weight the index, most of the gains have happened because of Tesla, Amazon, Microsoft, Apple, Navidia, and Alphabet, which is Google. Those seven or six stocks have made up most of the return of the S&P500. And so it's been a very narrow gain so far this year, which leads to the volatility. So watch that. It's really only been a few stocks. And the general market, it's been up slightly to flat mark slightly when you look at the market of stocks.
Oil prices continue to fall. You can see that to the right-hand side. That chart's always interesting. We don't think it will fall a ton further from here just because limited supply, under-investment here the last number of years, but we think the supply will kick in here and you won't see it fall back further. The US dollar has traded in a wide range. You can see how it ran up in 2022, pulled back a little bit here in 2023. And then over to the right-hand side, inflation remains well above the Fed target. And this was always eyeopening to me, if you can see that over here. The target is the 2% to 3% average there. We were below it for a long, long time and then last year, because of all the things we've talked about before, that inflation spiked up, the Fed started raising interest rates to combat some of that inflation. It has been working. You can see how the inflation rate has come down, but it's not back to the average nor the stated goal of the Fed, which is around that 2% range.
All right, the next chart is federal interest rate payments on the rise. And so this was something that you hear on the news all the time about how much the debt has gone up and with rising interest rates, what does that do to the payments? And that's what this chart shows. I found this quite interesting where you can of see the purple line there. That's the interest payments as a percentage of receipts. So of the taxes they receive, how much are they now having to spend on interest rates? And that's always something that worries you, that interest rates are going up. Is it going to cost more to pay the debt on the government? And you can see here that yes, it has risen here from 2021, which was at a pretty good low. Now it's 16% to 17% of receipts, but that's happened before. Back in the mid-90s, it was 25% of receipts.
And so it's not unprecedented what we're going through. It's just not something that we've seen here in a while. And then the orange line there, you see the orange line? That's basically the marketable debt as a percentage of GDP. Now, that has gone up and you can see that's the worry of how much debt we're keeping and what does that do down the line? At this point, I don't think it's creating a major crisis, but we can't keep adding debt as a percentage of GDP and think it won't affect the economy at some point. Right now, I think we're okay, but something you have to keep in mind and keep an eye on. Now, where are we headed? So inflation, we expect it to stay above the Fed's target rate for the rest of the year. We think it's coming down still, but it probably won't hit their targeted rate of that goal of 2%.
We do think GDP growth could turn negative, expected to turn negative as a recession. To get a recession, you need two negative GDP numbers over two quarters. We had that in the last year in 2022, but they never called a recession because you still had employment high. But we are expecting that the GDP growth will fall. We do think wage growth is rising, but real wages are still negative. Unemployment, we expect that unemployment suppressed by recovery of labor-intensive services. We think it's going to come down. Consumer confidence, which has been holding up the economy, we expect it to come down a little bit as worries about inflation, recession, global threats, all those things play into it. And then volatility, the markets have been fairly calm this year after being pretty haywire last year, but we're expecting that the volatility could pick up again.
But again, as we've talked before, no one knows for sure that maybe last fall was not the low point of the market. Who knows? Short-term, it could pull back and we're saying that be prepared that if volatility does kick up, that it could happen. It could happen again. Now, on this slide titled US Economy May Slip Into a Recession, this is what I was getting at earlier that we're projecting a slight recession here on this chart and you see the lighter color purple here going down. Last year, we had the GDP go down for two quarters in a row, which historically has been a recession, so we know what the markets did. They hit a bottom back in September/October. If we slide into a recession, is it like it was last summer as far as the investments go? Who knows for sure? But this is what we're projecting at this point.
This chart, I talked about that at this point, we think volatility could increase going forward and what does that really mean other than it makes it challenging when the markets are very volatile. Obviously, we like the volatility when the markets go up. It's those down times that we're worried about and why we think it's probably better to be cautious here, but there's a lot going on in this chart. It says elevated volatility is often accompanied negative markets. And so if you can look at that, if you see the yellow dotted line, that's average volatility as measured by the VIX, the V-I-X. And if you see the purple or blue line, that is volatility, the average volatility or the volatility at that time, and you can see right now here in 2023, it's increasing. It's still below average at this point versus last year in 2022 where it was above average.
And so above average volatility 70% of the time are company's negative markets. And so that's what I notice. When volatility is low, usually the markets are okay to getting better. If volatility is high, that's when we have negative markets and that's what we're worried about here or at least concerned about. Who knows for sure? But 35% of the time, we've had elevated volatility and it was a positive market, so it doesn't always mean it's going to be negative. And that volatility sometimes even goes into the recovery phase after a downturn. You see that elevated volatility even as the markets are increasing, but it is something to keep an eye on. This is something that we are concerned about here. The rest of the year is elevated volatility after being a little more calm here so far this year and higher last year and in 2020 with the COVID markets.
Okay, stay in the course. You've probably seen this. I've shared this chart a number of times through the years and it shows that negative markets are tough to deal with, especially now that we're 18 months, 19 months into a negative market, but this always reminds me that most years, even good years, there's times when the markets are negative. And you can see so far this year at some point that S&P was down about 8% and we're positive right now. Last year, the S&P was down 24% and the markets were down 18%. Back in 2020, during the COVID markets, the S&P was down 33% and ended up positive... What's that? 18% before [inaudible 00:13:03] it was all said and done. So volatility's going to happen. It's going to be down from time to time.
Usually, those 20% or 19% downturns happen every five to six years. We've had three now almost in the last five years. And so it has been challenging, but staying the course, because usually, if you remember, those good days happen right around the bad days and we need those good days to replenish after the bad days. And so staying the course, making sure you're not too aggressive, which that tends to happen when things are good, but not too aggressive with the portfolio. And then if you've got it set up correctly, hopefully, you can stomach these downturns and ride through it.
It says bear markets and recessions, and this one was eye-opening to me as well. We all remember the COVID market, right? I talked about it a second ago. The stock market dropped 33%, 35% before it actually closed positive. We had a slight recession during that, but it was pretty short-lived. And you can see there's a lot of numbers on this chart and if you'd like a copy of this, let me know and I'll get you a copy. But if you look right now here at this area right in here, current bear market started January 3rd, 2022. Right now, we're 17.9 months or almost 18 months into it. At the worst of it, it was down a little over 25%. And right below that, you see the average length of time in bear markets was 14.9 months, so we're a little bit longer than that. The average drawdown was 33.8%, so we're a little bit less than that at this point, but it's certainly longer than the 2020, which was 1.1 month, and then even the October 2007 where the market was down 17 months. So we're even longer than that.
This reminds me a little bit more of the tech bubble back in the late 90s, early 2000s where it took a while, but the one in 2007 was 17 months, but the markets were down roughly 56%. What did it return six months after the bear ended? That's that 27% here, 12 months, 42%, length to recover, 22 months. So we're almost 18 months into it. How long will it be before we get back to where we were? That's the question, but on average, it's 22 months before it gets back there. We don't know if we're out of this bear market yet. That's still yet to be determined. And if there is a recession, usually, the markets are a little worse than if there's not a recession. And so those are all the things to keep in mind as we're navigating this timeframe and why we say if we are heading to a recession, even a mild one, it's probably not a bad idea to still be cautious here and I know that's been a theme of this video.
So we covered quite a few slides on that. That one's a little bit more than I've done here lately, but I found a lot of them very informative and it hopefully helps you see what we're seeing and think about how we think about things. No one knows for sure what's coming. That's why we plan and we reallocate, we discuss what's going on. So if you have questions, don't hesitate to call me. Let's talk. Let's set up our strategy and review meeting. As we get into the fall, that's always a great time to prepare everything for the end of the year. So let me know if you would like to talk. Let me know if there's other topics that you would like to discuss. We're always trying to make these as informative as possible and make it useful for your time. As always, we really appreciate it. If there's anything we can do, don't hesitate to reach out. Have a great day.