Markets reversed direction and posted significant gains for the second half of March. In fact, those gains were enough to push the entire month into positive territory. While it’s too early to tell if we’ve hit the bottom of the current selloff, it appears that investors find the current stock prices attractive.
The biggest news story for the economy was the interest rate increase by the Federal Reserve (Fed) during their regularly scheduled meeting on March 16th. The Dow Jones Industrial Average (Dow), S&P 500 and NASDAQ all responded positively, posted weekly gains of 6%% to 8% to end the week, effectively recovering all the ground lost in the preceding two weeks of declines. It was the strongest weekly result since November 2020.
Inflation will likely be a key topic of discussion for the remainder of the year. One measure that impacts us all is the cost of food. U.S. grocery prices increased by 8.6% over the past year, ending on 2/28/22. The prior year’s increase, ending 2/28/21, was 3.5% and the previous year, ending on 2/29/20, showed only a 0.8% increase. (Source: Bureau of Labor Statistics.)
The key question remains: will prices remain elevated or will they return to a more sustainable level? The Fed has certainly set their sights on taming inflation and will likely continue raising interest rates for the remainder of this year. We pay close attention to the rate and degree at which they increase rates. This strategy is an effective way to combat inflation, but if rates are increased too rapidly, or too high, that can push the economy into a recession. So far, we believe the Fed’s measured response and disciplined approach is appropriate.
On the labor front things continue to look very good. In February 2022 the unemployment rate in the U.S. was 3.8%. By comparison, the pre-pandemic unemployment rate of February 2020 was 3.5%. There are currently 6.3 million unemployed Americans – while there are 11.3 million job openings (as of January 2022.) (Source: Department of Labor) Low unemployment and a greater number of job openings than available workers suggests a growing economy.
Wrapping up returns for the second half of the month, as of March 31st, the markets were all positive The Dow Jones Industrial Average (Dow) grew 1,134 points (3.4%), the S&P 500 increased by 268 points (6.3%) and the NASDAQ gained 1,272 points (9.8%).