One For the Record Books

2022 will go down in history as a landmark year for economics and financial markets, just not the type of year we want to remember. The highest inflation in 40 years, the most aggressive interest rate increases in modern history, and the Russia/Ukraine war were each unique in their own respects and caused extreme volatility in all investment asset classes. This is only the 5th time since 1926 that stocks and bonds have been down in the same year and the first time that both have declined by 10% in a single year. Please click here to continue reading our market update.

Focusing on What We can Control

After the worst first half since 1970, the third quarter started out with a bang as the S&P 500 increased over 17% from June lows. However, elevated inflation reports coupled with a Fed determined to squash it, led the market to give up all its gains and then some, ending the quarter at the lows for the year (-23.9%). This was the worst first three quarters to start a year since 2002, and the fourth worst since 1926. International markets performed even worse, and bonds continued their plunge with a 15% total decline year-to-date.

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No Place to Hide

There is generally only one free lunch in the investment world and that is diversification. Unfortunately, plain vanilla diversification has not worked this year as both stocks and bonds have seen historic declines. The S&P 500 posted the worst first half since 1970 (down 20%), and the 4th worst start to the year (1932 & 1962) in history. Bonds, most investors safe investment, were down 10.4%, the largest decline to start a year since data began being tracked in 1981.

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Market Update

We hope everyone and their families are healthy and safe and enjoying the start to summer. The first half of 2022 has certainly been a rough start to the year for both markets and the global economy: facing headwinds from an ongoing war in Ukraine/Russia, high and unpredictable inflation, rising interest rates and continued supply chain disruptions. While it was our belief that markets were due for a pullback and the confluence of these issues would result in a volatile market, we did not expect for it to happen this broadly and quickly.

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Looking for Good News

After a year in which the S&P 500 advanced by more than 28%, the first quarter saw major volatility with the S&P 500 ending the first quarter of 2022 down 4.6%. At the lowest point, the 500 largest companies were down 12.5% on March 8th, but rallied nicely through the end of the month. Growth stocks were particularly hard hit with the Nasdaq down over 20% at its low. The first Fed rate hike since 2018, the biggest conflict in Europe since WWII and the highest level of inflation in 40 years all weighed on investor confidence.

Please click here to continue reading our 1st Quarter Market Commentary.

Open for Business, but Closed to Easy Money

Despite some end of year volatility, major indices rallied during the 4th quarter, with the S&P 500 up 11% and the Dow up 8%. For the full year, the S&P 500 was once again the best performer of the major world indices, returning 26.9% and recording 70 new record highs, the most since 1955. This was the third straight year of double-digit returns. The markets were once again driven by earnings growth. Heading into 2021, the market consensus was for year over year earnings growth of 22%. Incredibly, actual earnings grew 65% year over year, the largest upward revision since this data has been tracked starting in 1984. Record inflows into equity funds and a resurgence in stock buybacks also helped major U.S. indices.

Please click here to continue reading our 4th Quarter Market Commentary.