March 2022 Market Update
What a start to 2022. While increased volatility and rising rates were expected, I think the uncertainty stemming from Russia/Ukraine has and will continue to determine market performance in 2022. While overall markets move into correction territory, we now watch our indicators to see if bottoms have been found, and how long it will be before confidence returns.
February was a bag of mixed messages for the markets. Let’s start with the positives: As we continue to work our way back from the pandemic, official 2021 GDP numbers came in at a very impressive 5.7%. That’s the strongest pace since 1984. Unemployment was another bright spot dropping to 3.8%, bring it back to pre-pandemic levels. Corporate profits remain very high and consumer demand for goods and services have been extremely strong. And while supply chains are still backlogged, they are beginning to improve as wait times for many goods are starting to decline.
The markets have been trying to digest rising rates and spiking inflation for a couple months now. Unfortunately, Russia invading Ukraine has added a third issue to worry about. While markets have already priced in the Feds raising interest rates this month; the debate now is just how many rate hikes will they do & how often. Now moving into another week in the conflict in Ukraine, the Fed looks to be weary of raising rates too fast and causing further pain to the US economy. We tend to think the Fed will keep a slow and steady pace of rate hikes over the coming year to try and combat inflation, without stalling out an otherwise growing economy. While inflation is broadly predicted to be cut in half by end of 2023, it’s certainly hitting us all in the wallet right now at the gas pump and grocery store.
*Performance reflects price returns as of market close on February 28, 2022. MSCI EAFE and the Bloomberg Aggregate Bond figures reflect February 25, 2022, closing values
As we all know, Russia is the wild card right now and we’ll have to continue to monitor that. The Ukrainians have displayed remarkable resistance and Putin has not had the quick victory he had envisioned. The world has responded by fierce financial sanctions but may take some time to show results. It is worth nothing that market declines due to geo-political risks like this seldom last long and markets historically recover quickly. We find the chart below gives a bit of long-term perspective:
We have made some tactical adjustments to many of our portfolios in light of these changes and we will continue to communicate those to you. As long-term investors we know that proper diversification and quality investments allow us to weather volatility so we can have confidence, even in uncertain times.
Lastly, 1099’s are out and you should’ve gotten that by now. If you didn’t, please let us know and we’ll email it to you. We will also be contacting you near the end of the month to schedule a 1st quarter review of your accounts.
As always, thank you for being a client and please let us know if you have any questions or concerns.
Take care,
Sean & John
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The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed-market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary.
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