First quarter, 2022, was rough for investors. The major markets all posted losses, with the Dow Jones Industrial Average (Dow) down 4%, the S&P 500 off 5% and the NASDAQ Composite Index (NASDAQ) lower by 9%1. Interestingly, the second half of March did feature a bounce with the markets gaining 2%, 3% and 3% respectively2. Unfortunately that was not enough to push returns into positive territory.
And it wasn’t just stocks that were down. The first quarter of 2022 was the worst quarter for U.S. Bonds in the last 40 years.
Coming off of Quarter 1 lows, the first half of April showed some signs of life, although the overall trend remained bearish. The war in Ukraine continues to impact the world economy and cause anxiety among investors.
Inflation is also dominating the news headlines, although we are beginning to see signs that this may be waning. Energy and food are driving the Headline Consumer Price Index (Headline CPI) higher. However, if you exclude these two volatile sectors, March core CPI saw its lowest gain since September 2021 and price gains in durable goods showed early signs of easing.3
With inflation well above the goal of 2%, the Federal Reserve (Fed) will likely continue its program of interest rate increases. The next regularly scheduled meeting is May 3-4, with many investors expecting a 0.5% increase.
Despite the challenging news, the economy continues to grow. Employment numbers continue to look great, with levels approaching pre-pandemic lows. A recent market perspective published by Vanguard continues to predict solid growth and modest positive returns by year end, despite Russia’s invasion of Ukraine and high inflation rates.4
Looking forward, first quarter earnings season begins this week with major banks set to release data.
Wrapping up returns for the first half of the month, as of April 15th, the markets were all lower. The Dow fell 137 points (0.4%), the S&P 500 dropped by 138 points (3.04%) and the NASDAQ lost 869 points (6.11%).
1&2 nasdaq.com, “March, First Quarter 2022 Review and Outlook”, 4/1/2022
3 jpmorgan.com, “Weekly Market Recap”, 4/18/22
4 advisors.vanguard.com, “Market perspectives: April 2022” 3/29/2022