Monthly Market Recap: October 3, 2022

September Market Recap

October 3, 2022 

Investors desperate for good news received very little in September.

The latest inflation readings fell less than expected, the Federal Reserve doubled-down on its rate-hiking, and equities responded by sinking to calendar-year lows. When markets closed on Friday afternoon, the S&P 500 concluded its worst month since March 2020. The S&P and NASDAQ finished lower for the third consecutive quarter, something that hasn’t happened since 2009.

In terms of year-to-date performance, only two years (1974 and 2002) in the last 75 were worse than the S&P 500’s 24.8% loss through the first nine months of 2022. Those looking for a silver lining will like knowing that the S&P gained 8% over the final three months in both years.

All 11 sectors in the S&P 500 decreased last month. Real Estate (-13.6%), Communication Services (-12.2%), and Technology (-12.1%) inflicted the most pain. Health Care (-2.7%) weathered the storm best.

Index September 2022 YTD 2022
Dow -8.84% -20.95%
S&P 500+ -9.34% -24.77%
NASDAQ -10.50% -32.40%

The Fed has put itself into a difficult position with only two possible paths out: Either it continues raising interest rates aggressively to bring down inflation and harms the economy by doing so. Or it maintains more friendly monetary policy to support financial markets but allows inflation to remain elevated for the foreseeable future. Both routes will be bumpy. Both will bring criticism. But Fed Chair Jerome Powell, who announced another 0.75% increase to the Fed Funds Rate on September 21, has made it clear he believes killing inflation is worth any collateral damage.

The latest inflation gauges seemed to convince markets this battle may take longer than expected to win. The Consumer Price Index (CPI) released on September 13 showed only a small decrease in annual inflation (8.3% compared to 8.5% a month earlier). Excluding food and gas prices, “core inflation” rose month-over-month. The S&P 500 reacted with its largest daily decline (-4.3%) since June 2020. The Dow Jones Industrial Average lost nearly 1,300 points.

Another closely watched metric, Personal Consumption Expenditures (PCE), showed 6.2% annual inflation, down only slightly from 6.4% a month earlier. Released on September 30, the PCE data was followed by another wave of selling that sent the S&P 500 to its lowest close of the year.

There are, however, numerous indicators that suggest “peak inflation” is in our rear-view mirror. Shipping costs are down 60% since January. Oil plunged to an 8-month low in September, with West Texas Intermediate Crude trading below $80 per barrel. Home sales and new construction have slowed significantly. Lumber prices are 64% less expensive than where they began the year.

The housing market is another part of the economy that has undergone major changes in an especially short period of time. The average interest rate on a 30-year home mortgage hovered around 7% at the end of September. It’s been 20 years (January 2002) since borrowing costs were this high for homebuyers.

Bond yields rocketed higher in September. 10-year US Treasury Bonds yielded 3.8% at month’s end and got as high as 3.99% on September 27. The last time yields touched 4% was June 2009, during the Great Recession. As yields have climbed, the prices of existing bonds have cratered. Those invested in traditional bond funds will be staring at year-to-date losses around 15% on their third-quarter statements.

International equities sold off at a similar pace to US stocks. Non-US Developed equities lost 9.2% in September. Emerging Markets fell 11.5%. Both categories continue to face the headwind of an exceptionally strong US dollar, which strengthened a further 3.2% last month versus a basket of global currencies.

US companies will begin reporting third-quarter earnings in the weeks ahead, and with expectations lowered given persistent inflation and general economic pessimism, there is hope even moderately good earnings may create some positive momentum. As of September 30, consensus estimates called for only 2.9% annual earnings growth from S&P 500 companies.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: September 1, 2022

August Market Recap

September 1, 2022 

August will be remembered as the month in which the stock market finally began taking the Federal Reserve seriously.

Following the best month since 2020 (July), August began with positive momentum but ultimately ended in disappointment following harsh words by Fed Chair Jerome Powell, who essentially admonished investors for expecting the Fed might ease off the gas in its race to conquer high inflation.

Performance among the major equity benchmarks was unusually even. The Dow Jones Industrial Average, S&P 500, and NASDAQ all fell 4-5% in August. The losses from their mid-month highs, however, were more significant. From August 16 through month-end, the Dow fell 8%. The S&P 500 dropped nearly 9%. And the NASDAQ decreased more than 10%.

Nine of the 11 sectors in the S&P 500 were lower in August. Technology (-6.3%) and Health Care (-5.9%) were the worst of those. Energy (+2.2%) and Utilities (+0.1%) performed the best.

Index August 2022 YTD 2022
Dow -4.06% -13.29%
S&P 500+ -4.24% -17.02%
NASDAQ -4.64% -24.47%

Our nation’s central bank has a credibility problem due to several instances in recent years when the Fed began to raise interest rates, only to reverse course and prioritize favorable market conditions above all else. That track record helped fuel a rally in US equities that allowed the S&P 500 to gain nearly 19% from its mid-June low to its intraday high on August 16.

Investors, in other words, didn’t believe the hawkish rhetoric from Fed Chair Jerome Powell and others who insisted the Fed was committed to slaying inflation, even if it meant inflicting legitimate financial pain. Powell finally got his point across while speaking at the annual “economic symposium” in Jackson Hole, Wyoming.

“We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%,” Powell said on August 26. “This will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation.”

Stocks responded to those comments by selling off sharply. The Dow tumbled over 1,000 points (-3%) on August 26. The S&P (-3.4%) and NASDAQ (-3.9%) fell even more.

The good news is that the Fed’s preferred inflation gauge is showing progress in the right direction. The latest Core PCE (Personal Consumption Expenditures) index rose only 0.1% month-over-month, a much slower trajectory than the 0.6% increase from May until June.

Another silver lining: The second-quarter GDP estimate originally released in late July was revised higher to show economic growth contracted by only 0.6% annualized (compared to 0.9% originally).

Bond yields climbed steadily throughout August. 10-year US Treasuries ended the month yielding 3.13% (compared to 2.6% on August 1). The last time 10-year Treasuries yielded 3.5% or more was 2011.

Because parts of the yield curve remain inverted, conservative investors can finally get a decent return on their safe money. For clients with available cash, our Marks Group team has been investing more dollars into 6-12 month Treasuries offering annualized yields around 3.3% (as of August 31).

We don’t often write about currencies, but it’s worth noting the US dollar has reached parity with the euro, something that hasn’t happened for a sustained period of time in almost 20 years. Versus a basket of global currencies, the dollar has strengthened 19% in the last 12 months. For American investors, that trend has hurt the relative performance of international equities. For American tourists, on the other hand, it’s a great time to travel abroad!

Speaking of international investments, Non-US Developed equities slipped 6.1% in August. Emerging Market equities held up much better, down only 1.3%.

The slow but steady trickle of lower gasoline prices continued last month. The national average price for a gallon of gas on August 31 was $3.83, according to AAA. That’s down from $4.21 per gallon at the end of July, but still 20% higher than a year ago ($3.17).

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: August 1, 2022

July Market Recap

August 1, 2022 

The bear market is not yet dead, but a month-long hibernation was a welcomed change for investors growing more grizzled with every selloff.

The S&P 500 gained more than 9% in July, effectively clawing back all of its June losses and posting the benchmark index’s best month since 2020. The NASDAQ performed even better, increasing more than 12% thanks to strong earnings from several large technology companies.

Each of the 11 sectors in the S&P 500 recorded positive returns in July, a complete reversal from June when all 11 sectors booked losses. Consumer Discretionary (+18.9%) and Technology (+13.5%) climbed highest. Energy (+9.6%) also resumed its upward trend. Consumer Staples (+3.1%) and Health Care (+3.2%) lagged in relative terms.

Index July 2022 YTD 2022
Dow +6.73% -9.61%
S&P 500+ +9.11% -13.34%
NASDAQ +12.35% +20.80%

July brought a quartet of market-moving events worth circling on the calendar: Fed hikes, inflation reports, second-quarter GDP, and corporate earnings.

On July 27, the Federal Reserve raised its benchmark Fed Funds Rate by another 0.75%, the second consecutive month it has done so. Rumors had swirled of a possible 1% hike, which failed to materialize. Stocks rallied sharply as a result. The NASDAQ surged 4.1% on July 27, its best single-day performance in more than two years (4/6/2020).

Here’s the money quote from Fed Chair Jerome Powell: “As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of (rate) increases while we assess how policy adjustments are affecting the economy and inflation.”

The size and pace of future rate hikes, in other words, will be data-dependent. With two months until the next scheduled Fed meeting (September 16), the hope is that forthcoming economic data reveals enough slowing to warrant less aggressive monetary policy.

Inflation, of course, is the most obvious gauge of whether recent Fed policy is achieving its goals. The latest Consumer Price Index (CPI) released July 13 revealed 9.1% inflation from a year earlier. It was another high-water mark for 2022 inflation, and fueled temporary speculation that the Fed might amp up hawkish policy even further.

One day after the Fed’s July rate hike, we learned the US economy contracted by 0.9% annualized in the second quarter (April-June). This comes after a 1.6% drop in Q1. Based on the traditional definition (two consecutive quarters of negative GDP growth), this puts our economy into a recession, although Powell and several politicians are doing their best to claim otherwise.

It was encouraging to see the stock market not overreact to this news. It was far from breaking news that economic growth is slowing. Even if the latest GDP number had been slightly positive, the overall narrative would not have changed. The S&P 500 increased 1.4% on July 28 following the GDP report, which of course can still be revised retroactively (higher or lower) in August.

That leaves second-quarter corporate earnings as the final area of focus last month. With slightly more than half the S&P 500 companies having reported so far, earnings are on pace to increase by 6% from a year earlier. That’s better than consensus expectations forecasting 4% earnings growth.

Apple, Alphabet (Google), and Amazon were among the mega-cap companies that met or exceeded earnings expectations in late July. Those three companies alone make up nearly 15% of the S&P 500 index.

While the change in momentum helps calm nerves and sooth portfolio values, it’s still too early to tell whether the ultimate bottom of this bear market is behind us. July’s bounce certainly creates a larger buffer. As of month-end, the S&P 500 was only 2% below the midway point between its all-time high and the mid-June low.

Evolving Fed policy will ultimately have a big impact on how this plays out, and the bond market is suggesting that policy will moderate from here. 10-year US Treasury yields fell further in July, ending the month at 2.64%. That’s down from a 2.97% yield at the end of June and a recent peak of 3.4% in mid-June.

It was a mixed bag for international equities in July. Non-US Developed equities gained 5.2% last month, but Emerging Market stocks fell 0.3%. That performance gap is mostly attributable to China, whose government implemented another round of shutdowns in several large cities in response to proportionally minimal cases of COVID-19.

It’s not a coincidence that the stock market has performed better as gasoline prices have fallen. According to AAA, the national average for gas was $4.22 per gallon as of July 31, down from the peak of $5.02 per gallon in mid-June.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: July 1, 2022

June Market Recap

July 1, 2022 

Every successful investor knows the value of practicing patience, but the waiting game is becoming admittedly more difficult to play.

The stock market concluded the first half of 2022 with an appropriately teeth-gritting month. The S&P 500 fell 8.4% in June. The benchmark index’s 20.6% loss year-to-date is the worst 6-month start to a calendar year since 1970. Despite heavy downward pressures in the first two weeks, however, equities did climb higher in the second half of June.

All 11 sectors in the S&P 500 declined compared to a month earlier. In a notable change from recent trends, Energy (-17%) performed worse than any other sector. Materials (-14.1%) were also especially weak. Health Care (-2.8%) and Consumer Staples (-2.9%) proved most resilient.

Index May 2022 YTD 2022
Dow -6.71% -15.31%
S&P 500+ -8.39% -20.58%
NASDAQ -8.71% -29.51%

The first week of June was relatively uneventful as investors waited for the latest inflation data. There was a building sense of hope that inflation may have peaked in previous months and the Consumer Price Index report on June 10 would confirm as much. Instead, the latest CPI number announced on June 10 caught markets completely off guard, revealing 8.5% annual inflation (compared to 8.3% a month earlier).

Stock prices sold off aggressively. The S&P 500 fell 2.9% on June 10 and 5% total from the previous day’s peak. The Dow Jones Industrial Average lost 880 points on June 10 and more than 1,500 points total from the previous day’s high. When markets closed on June 10, it ended the most negative week for stocks since January.

Five days later on June 15, the Federal Reserve raised its benchmark interest rate by 0.75%, despite Fed Chair Jerome Powell saying a month earlier that “0.75% rate hikes were not being actively considered.” It was the first time since 1994 the Fed raised rates so significantly in a single hike.

On June 16, the average price for gasoline (nationally) hit $5.11 per gallon, another 10% higher than the price as of May 31. 30-year fixed mortgage rates hit 5.8% that day, their highest level since 2008. As of its intraday low on June 17, the S&P had fallen nearly 25% from its early January peak

Enough with the bad news. The last three times the S&P 500 fell 12% or more in 10 trading days (as it did in June) occurred in March 2020, August 2011, and March 2009. All of those represented significant “bottoms” for US stock prices.

From its June 17 low, the S&P 500 gained 4.1% through June 30. As for the worse-than-expected inflation report, if we strip out the items linked to energy (airfares, moving/freight, rental cars, delivery services, new & used vehicles) Core CPI was +0.36% from a month earlier and only 4% higher year-over-year. If oil prices retreat from their sky-high levels, inflation could slow more quickly than many expect.

It was an interesting month in the bond market. 10-year US Treasury yields climbed as high as 3.48% on June 14, the highest in 11 years. Since then, however, bond prices rallied and yields decreased. By month’s end, 10-year yields had fallen all the way to 2.97%, suggesting a lack of faith in the Fed’s commitment to raising interest rates as the economy inevitably weakens.

International equities performed marginally better than US stocks last month. Non-US Developed Markets lost 6.6% in June. Emerging Market equities held up a bit better, declining 4.3%.

Although crude oil prices remain elevated, they did pull back roughly 13% in the final three weeks of June. Other commodity prices have also weakened considerably. Copper fell almost 20% in the second quarter (April through June). Lumber prices are down more than 30% over the same period.

On one hand, lower commodity prices reflect some economic weakness. On the other, less expensive material costs are a benefit in the fight against inflation.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: June 1, 2022

May Market Recap

June 1, 2022 

Zero-point-zero-one percent (0.01%).

That’s how much the S&P 500 gained last month. And to be honest, we’re rounding up. The official math was actually 0.005%. Is that something worth celebrating? Perhaps not. No one will be popping any champagne corks after reviewing their May 31 statements, but even the most modest of positive returns does represent a step in the right direction following April’s aggressive selloff.

Six of the 11 sectors in the S&P 500 moved higher in May, led by Energy (+15%) and Utilities (+3.8%). Five equity sectors booked losses. Of those, Real Estate (-5.1%), Consumer Discretionary (-4.9%), and Consumer Staples (-4.7%) performed the worst.

Index May 2022 YTD 2022
Dow +0.04% -9.21%
S&P 500+ +0.01% -13.30%
NASDAQ -2.05% -22.78%

High inflation and tighter monetary policy from the Federal Reserve remain the angry elephants in the proverbial room that investors are trying to navigate. As far as market obstacles, expect those two to remain at the top of the list for the foreseeable future.

Inflation actually slowed in May. The most recent Consumer Price Index revealed year-over-year inflation of 8.3%, lower than a month earlier (8.5%), but still higher than consensus estimates.

On May 4, the Fed raised its benchmark interest rate by 0.50% and announced plans to begin “passive tightening.” Beginning in June, the Fed will not reinvest the interest paid by its existing bonds and will not reinvest the principal from maturing bonds. A maximum of $95 billion per month will effectively roll off the Fed’s balance sheet.

More significantly, Fed Chair Jerome Powell said the Fed was “not actively considering” rate hikes as large as 0.75%. Equities initially took Powell’s comments as a positive. The Dow rallied 932 points (2.8%) on May 4. The S&P 500 and NASDAQ bounced even more. Those gains, however, did not last long. On the following day (May 5), the Dow fell 1,063 points (3.1%). The S&P lost 3.6%. The NASDAQ dropped 5%.

It’s the first time since March 2020 that US stocks delivered such whipsaw results on consecutive days. High volatility is certainly indicative of a bear market, and while the S&P has so far avoided a 20% peak-to-trough decline (if we’re sticking with end-of-day prices), it is basically semantics at this point.

Ignoring the Energy sector – up nearly 56% year-to-date thanks to skyrocketing oil prices – the S&P has already ventured well into bear market territory. The tech-heavy NASDAQ and smaller-cap Russell 2000 both lost more than 30% at their low points.

Everyone wants to know whether those mid-May lows represent “the bottom.” There’s no way to know for sure, but history is on our side in terms of forward-looking returns.

The first 100 trading days of 2022 (S&P -16.5%) make this one of the six worst starts to a calendar year since 1930. In the other five, US stocks were positive over the next seven months every time, with the S&P gaining 19% on average through year-end.

Equities did stage a significant rally in the final week of May. The S&P 500 increased 7% in those five trading days, its best week of the year. It also snapped a string of seven negative weeks in a row. Perhaps the tide is beginning to turn.

Bond prices also stabilized in the second half of May. 10-year US Treasury yields climbed as high as 3.17% on May 9 before reversing course and ending the month at 2.84% (slightly below the 2.89% yield from a month earlier). The major US bond benchmarks have lost roughly 10% year-to-date through May 31, though our individual bond ladders employed in Marks Group portfolios have held up much better.

The May 31 lifting of government-mandated lockdowns in China offered another glimmer of hope for investors.  The Chinese economy and global supply chains were severely disrupted following a spike in new COVID-19 cases and the resulting lockdowns.

International equities outperformed in May. Non-US Developed Markets (as represented by the MSCI EAFE Index) increased 2%. Emerging Markets gained 0.6%.

US mortgage rates hit their highest level since 2009. The rate on a 30-year fixed loan was 5.3% at month’s end, essentially double the rate from the low point in January 2021.

The US jobs report showed national unemployment remains exceptionally low at 3.6%.

Gasoline prices hit another record high with average costs of $4.69 per gallon, according to AAA. It’s now 50% more expensive to fill your car with gas than it was a year ago ($3.11 per gallon).

West Texas Intermediate Crude oil trades near $115 per barrel, up another 9.5% in May.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: May 2, 2022

April Market Recap

May 2, 2022 

It was an especially painful month for equity investors. Rather than attempt to sugarcoat that fact, we’ll do our best to put recent market movements in perspective and make sense of current financial conditions.

The S&P 500 lost 8.8% in April, its worst monthly performance since March 2020, when the COVID-19 pandemic blindsided the global economy. Last Friday alone, the Dow Jones Industrial Average fell 939 points (2.8%), the S&P dropped 3.6%, and the NASDAQ plummeted 4.2%. Ouch.

We took our family to Disney World over spring break, a trip that included a ride on the Twilight Zone Tower of Terror. Even with the experience of being on that same ride 25 years earlier, the violent series of ups and downs followed by a lengthy freefall at the end was hard to stomach.

That’s kind of how watching the stock market felt last month. Even when you’ve been through it before, corrections and volatility spikes are never fun.

Consumer Staples (+2.4%) was the only one out of 11 sectors in the S&P 500 to manage positive returns. Energy (-1.6%) also lost considerably less than the major indices. It was a much farther fall for Communication Services (-15.8%), Consumer Discretionary (-13%), and Technology (-11.3%).

Index April 2022 YTD 2022
Dow -4.91% -9.25%
S&P 500+ -8.80% -13.31%
NASDAQ -13.26% -21.16%

The S&P 500’s 13.3% loss through the first four months of 2022 makes this the worst start to a calendar year since the Great Depression. In the last 95 years, only 1932 (-28.2%) and 1939 (-16.8%) saw larger declines. 1942 (-11.9%) and 1970 (-11.4%) were also especially ugly.

Ready for the silver lining? After the awful starts in those four years, the S&P delivered average returns of +18.4% from May 1 through year-end.

The pair of elephants in the proverbial room impeding the path to better performance are Inflation and Tighter Fed Policy. Those are the same two obstacles, of course, that markets have been trying to circumnavigate all year. What changed in April was the Fed’s rhetoric becoming more aggressive.

The Fed minutes released on April 8 revealed that policymakers are strongly considering raising rates by 0.50% the first week of May (a 50-basis-point hike is now the consensus expectation). On April 21, Fed Chair Jerome Powell said “It’s appropriate to be moving a little more quickly (to raise interest rates).” Powell further clarified that taming inflation is “absolutely essential.”

Nine days prior to Powell’s comments, the Consumer Price Index (CPI) report showed inflation has risen to 8.5% (up from 7.9% in March). Evidence is building that year-over-year inflation may be nearing its peak. Once that happens, slowing inflation could be a catalyst for higher stock prices.

US Gross Domestic Product contracted by 1.4% (annualized) in the first quarter, an abrupt reversal following a year in which the American economy posted its most significant growth since 1984. More significant in our view, however, is that consumer spending remained strong, rising 2.7% from a year earlier.

Inflation tends to hurt growth stocks more acutely because future earnings are worth less in inflation-adjusted terms. The growth-heavy NASDAQ certainly proved more vulnerable last month. Its 13.3% decline in April was the NASDAQ’s worst month since October 2008.

Another unique aspect of this selloff is that bonds have performed nearly as bad as stocks. The 10-year US Treasury yield finished April at 2.89% (up from 2.33% a month earlier). It’s the largest monthly increase in bond yields in 12 ½ years (December 2009). The US Aggregate Bond Index has lost 9% year-to-date, although investors who own individual bond ladders are less exposed to those losses.

Not surprisingly, investor sentiment has grown especially negative. Recent surveys show nearly 60% of respondents are feeling bearish, the most pessimistic readings since February 2009. In contrarian terms, we view this as a positive indicator. The Feb. 2009 readings occurred just weeks before stocks bottomed during the Great Recession.

International equities lost less than US stocks in April in spite of the US dollar strengthening nearly 5% versus a basket of global currencies. Non-US Developed equities fell 6.7%. Emerging Markets were down 6.1%.

Gold prices declined 2% in April, but remain up 3.5% year-to-date.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: April 1, 2022

March Market Recap

April 1, 2022 

While the NCAA basketball tournament provided its annual dose of can’t-miss entertainment, stocks were able to survive and advance in what proved to be the best (and only positive) month this year for US equities.

Similar to a good March Madness game, it was hard to guess the finish based on the way things started. Momentum remained mostly negative in the first two weeks. When markets closed on March 14, the NASDAQ was 8.5% lower than it began the month. From there, it bounced 13% higher in 13 trading days.

When the dust settled, each of the three major equity benchmarks rose between 2-4% for the month. Ten of the 11 sectors in the S&P 500 were positive led by Utilities (+10.1%), Energy (+8.8%) and Real Estate (+7.3%). Financials (-0.4%) was the only sector to finish in the red.

Index March 2022 YTD 2022
Dow +2.53% -4.57%
S&P 500+ +3.58% -4.95%
NASDAQ +3.41% -9.10%

The trading week that ended on March 18 was the best week for US stocks since the November 2020 election. The NASDAQ gained 8.2% in that week alone. The S&P increased 5.6%, including four consecutive days with gains of 1% or more; only the fifth time ever that has happened.

Some of the recovery in equities can be attributed to the realization that the military conflict between Russia and Ukraine does not set the globe on an inevitable path to World War III, a popular (if far-fetched) concern a month ago as investors contemplated worst-case scenarios.

It’s probably also true that sentiment simply became too pessimistic. Consumer confidence readings in March were the lowest in 10 years. War, inflation, Fedwinds… Whatever your favorite brick in the latest wall of worry, fear and anxiety seemed to snowball until mid-March, which reminds us of Warren Buffett’s oft-cited investment advice to “be greedy when others are fearful.”

The rate of inflation continues to increase. The latest Consumer Price Index rose 7.9% from a year earlier and the spike in energy prices made worse by war-related supply chain disruptions seems likely to push inflation even higher this summer.

That provides the backdrop for Federal Reserve policy and Fed Chair Jerome Powell, who on March 16 announced a 0.25% rate hike and plans for seven hikes by year-end. It’s a delicate dance the Fed must choreograph to counteract inflation without triggering an economic recession, but it’s encouraging that the market responded favorably to Powell’s latest update. The S&P 500 increased 2.2% that day.

Bond yields jumped significantly in the last four weeks. The 10-year US Treasury yield finished March at 2.33%, compared to a 1.7% yield less than a month earlier. As yields increase, the price of existing bonds go down. It’s been a rocky start to the year for investors who own bond funds with the US Aggregate Bond Index down nearly 6% year-to-date.

Yield curve inversions tend to generate headlines because they are a well-known precursor to recessions. The 2-year vs 10-year Treasury curve inverted in March. Yes, it’s a potential warning, but not as simple as some folks would lead investors to believe. The last four times this occurred, equity prices did not peak until 17 months later.

If you’re a homeowner, feel free to celebrate the surge in home prices over the last 12 months. The Case-Shiller US Home Price Index shows an average annual increase of 19% in home prices. Residential real estate in Miami (+28%), Tampa (+31%) and Phoenix (+33%) saw the biggest jumps.

If you’re in the market for a new property or a hopeful first-time homeowner, the news isn’t so positive. In addition to inflated home prices, the cost of financing has risen substantially. 30-year mortgage rates have surged to 4.67%, nearly doubling the all-time low of 2.65% from January 2021. The amount of pending home sales nationally has fallen four months in a row.

Non-US Developed equities rose only 0.5% in March. Emerging Market equities fell 3.4%. While International stocks had outperformed US companies in January and February, their year-to-date losses now exceed the S&P 500 three months into 2022.

Oil prices increased another 5% in March, further fueling the recent gains in Energy stocks. Those gaudy year-to-date returns have not had much impact on the major benchmarks, however, given that Energy represents less than 4% of the S&P 500.

The US labor market added 431,000 jobs in March, which dropped the national unemployment rate to 3.6%. There are now 5.3 million more job openings in America than there are unemployed people (a new record).

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: March 1, 2022

February Market Recap

March 1, 2022 

A stock market already struggling to find its footing was dealt another blow in February.

Russian President Vladimir Putin’s unprovoked invasion of Ukraine not only lit the fuse on geopolitical tensions, it increased the blood pressure of investors around the world wondering how the conflict will affect the course of global financial markets in the year ahead.

Stock prices sank lower across the board last month, but were trending lower for most of February even before Russia’s build-up of military troops escalated into a full-scale war. Similar-looking losses for the major equity indices (all between 3-4%) are indicative of a selloff triggered more by macroeconomic developments than by company (or sector) specific news.

For the second consecutive month, 10 of the 11 sectors in the S&P 500 were negative. And for the second straight month, Energy (+6.4%) was the lone exception. Health Care (-1.1%) and Industrials (-1.1%) also outperformed. Communication Services (-7.0%), Real Estate (-5.1%), and Technology (-5.0%) suffered the largest losses.

Index February 2022 YTD 2022
Dow -3.53% -6.73%
S&P 500 -3.14% -8.23%
NASDAQ -3.43% -12.10%

The consequences of war can be exceptionally difficult to quantify.

Financially speaking, it was the details and depth of economic sanctions against Russia that drove market movements in the final week of February. The initial wave of sanctions, deemed less aggressive than expected, led to a relief rally on February 25. When stiffer sanctions from a larger coalition of allies were announced a few days later, stock prices sold off dramatically.

Russia is interesting in that it holds enormous political influence, is the largest country in the world by landmass, and (as a major supplier of oil to Europe) plays a serious role in global energy markets.

That said, the Russian economy represents less than 2% of global GDP. Italy’s economy is twice the size. Poland exports more goods to Europe than does Russia. That context is important when considering the expected impact of new economic sanctions on global supply chains, commodity prices, and revenue streams.

As of market-close on February 28, the S&P 500 had fallen 9.2% from its all-time high. The NASDAQ finished the month 15.2% below its highwater mark. Small-cap stocks outperformed in February. The Russell 2000 gained 1% for the month, but remains nearly 17% below its November 2021 high.

Expect the market’s focus to shift back toward the Fed in March when Jerome Powell formally announces the central bank’s first rate-hike of 2022. To be clear, high inflation and the expectation of rising interest rates remain far more significant to the market’s direction than the military conflict in Ukraine. One counterbalance of the recent weakness in equities is that the Fed will almost certainly avoid a larger 0.50% rate increase in March.

Valuations of US equities have already fallen considerably. Since the S&P 500’s all-time high in early January, its forward P/E ratio has fallen 14%. Valuations, in other words, have decreased even more than stock prices. In the final week of February, the S&P’s forward P/E (18.5) fell below its 5-year average for the first time since April 2020.

Year-over-year inflation accelerated to 7.5% in February (up from 7% a month earlier). Bond yields also reached their highest levels in 2 ½ years.  The 10-year US Treasury yield rose above 2% for the first time since July 2019 before retreating. The 10-year yield ended February at 1.84%.

Corporate earnings remain incredibly resilient. Blended earnings for S&P 500 companies rose more than 30% in Q4 2021, the fourth consecutive quarter in which earnings grew at least 30%.

As bonds yields move higher, so too have US mortgage rates. The average interest rate on a 30-year loan was just over 4% as of month’s end.

West Texas Intermediate Crude oil topped $100 per barrel in late February, the first time that has happened since 2014. It finished the month just under $96 per barrel.

With oil prices spiking, US gasoline prices rose to a national average of $3.61 per gallon.

Gold rose 6.1% to its highest price in 14 months.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: February 1, 2022

January Market Recap

February 1, 2022 

Whoever said “January is the Monday of months” certainly had it right about 2022.

The stock market’s opening act of the new year left its audience running for the exits. Sobering realities of 7% inflation and a Federal Reserve certain to implement less favorable monetary policy hit investors like a Minnesota wind chill. The S&P 500 lost 5.3%, its worst month since the pandemic panic of March 2020. It was the worst January performance for stocks since 2009, when the S&P fell 8.6%.

Volatility spiked as the selling intensified. The Chicago Board of Exchange Volatility Index (“the VIX”) reached its highest mark in a year. With that came extreme intraday swings. The average spread between the S&P 500’s daily highs and lows in January was 2.06%, more than twice the average daily spread last year (0.97%). Put another way, a “normal” trading day last month saw stocks fluctuate the equivalent of 730 Dow points.

All but one of the 11 sectors in the S&P 500 were negative. Consumer Discretionary (-9.7%) and Real Estate (-8.5%) lost the most. The only sector to finish positive was Energy (+19%), which delivered remarkable outperformance thanks in part to sharply higher oil prices. Financials (-0.1%) also weathered the storm relatively well.

Index January 2022 YTD 2022
Dow -3.32% -3.32%
S&P 500 -5.26% -5.26%
NASDAQ -8.98% -8.98%

If you’re looking for a silver lining, the good news is that equities finished the month on a high note. The S&P 500 gained 4.4% in the final two days of January. At its low point on January 24, the S&P had fallen 12.4% from its intraday peak in only 13 trading days.

The NASDAQ was battered even more, falling 17.4% over the same period and finishing January with a 9% loss overall. Dating back to the pandemic lows two years ago, mega-cap technology companies have been some of the market’s best performers. Many of those same companies proved especially vulnerable last month.

Consensus expectations on Wall Street suggest the Federal Reserve will raise interest rates five times in 2022. Perhaps Fed Chair Jerome Powell can successfully navigate these troubled waters, but it will require a delicate balance between staving off inflation and appeasing investors who have grown accustomed to historically friendly monetary policy.

It was the minutes (notes) from the Fed’s December meeting, released on January 5, that indicated a March hike was coming and sent stock prices southward. Joe Biden then applied some political pressure on January 19 when the President stated that fighting inflation is the job of the Federal Reserve. “Given the strength of the economy and the pace of recent price increases, it’s appropriate to recalibrate the support that is now necessary,” Biden said.

Year-over-year inflation clocked in at 7% in January, up from 6.8% a month earlier and the highest such reading since 1982. The national unemployment rate fell below 4%. When you consider the Fed’s official mandates to promote “maximum employment, stable prices, and moderate interest rates” it becomes obvious why a shift in policy is upon us.

If we look beyond inflation and the Fed, there are still reasons for optimism. The US economy grew at an annualized rate of 6.9% in the fourth quarter. On an inflation-adjusted basis, American GDP grew 5.7% overall last year, the strongest annual growth since 1984.

Corporate earnings also continue to impress. With roughly one-third of S&P 500 companies already reporting, fourth-quarter earnings are on pace to increase 24% from a year earlier. If we hit that mark, it will be four consecutive quarters with earnings growth of 20% or more.

10-year US Treasury bonds finished January yielding 1.78%, the highest in two years. It was summer 2019 when 10-year Treasuries last eclipsed 2%, a threshold that holds symbolic significance and could provide short-term resistance.

Higher bond yields are not just an American trend. The 10-year German bund yield ended January above 0% for the first time since May 2019 (no, that’s not a typo). The 10-year Japanese Government Bond also rose to a five-year high.

International equities outperformed US stocks in January. Non-US Developed equities (measured by the MSCI EAFE Index) fell 3.6%. Emerging Market stocks, which lagged far behind US stocks in 2021, were flat.

West Texas Intermediate Crude oil jumped more than 17% last month. That corresponded with a 15% increase in US gasoline prices, which now average $2.55 per gallon nationally. Gold prices fell 1.7%.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Monthly Market Recap: January 3, 2022

December Market Recap

January 3, 2022

As we look ahead to a new year, most Americans are probably hoping 2022 will have very little in common with 2021. Spending almost two years under the suffocating weight of a global pandemic makes that understandable. Yet, as far as investors are concerned, most would gladly take more of the same.

The US stock market wrapped up 2021 on a familiar path… Trending higher. The S&P 500 and Dow Jones Industrial Average both finished the year within 1% of their all-time highs thanks to December returns above 4% and 5%, respectively. The vast majority of those gains came in the final 11 days of the year. The NASDAQ gained less than 1% last month and ended 3.5% below its highwater mark.

Ten of the 11 sectors in the S&P 500 delivered positive performance in December. Consumer Staples (+10%), Real Estate (+9.7%), and Utilities (+9.4%) led the pack. Only Consumer Discretionary (-0.3%) finished in the red.

Index December 2021 YTD 2021
Dow +5.38% +18.73%
S&P 500 +4.36% +26.89%
NASDAQ +0.69% +21.39%

On its way to a 27% calendar year return in 2021, the S&P 500 closed at a new all-time high an astonishing 70 different times. That’s the second most ever. Only 1995 had more (77).

While the momentum remained positive for the vast majority of the year, equities began December with a bit more uncertainty. Stocks had been negative in two of the previous three months (September, November) and investors were still making sense of a steep Omicron-induced selloff.

Equities moved higher in the first week of December before facing some mid-month volatility. Some of that may have been rekindled COVID concerns, but more was due to the latest developments from the Federal Reserve.

On December 15, the Fed released a statement announcing its intention to quicken the pace of its tapering. That is to say, reducing economic stimulus twice as fast as Fed Chair Jerome Powell originally suggested. The accelerated schedule puts the Fed on pace to eliminate bond buying and begin hiking interest rates in the second quarter of 2022.

The S&P 500 sold off 4% in the three days after that news, but it was all positive from there. Stock prices surged significantly from December 21 through year-end. In hindsight, it looks like a somewhat predictable Santa Claus rally. Some years, perhaps all you need to do is believe.

As good as 2021 was for equities, it was an ugly year for bonds. The Bloomberg Barclays Aggregate Bond Index lost 1.7% for the year. In its 46-year history, the index has only registered a negative calendar year return three other times, most recently in 2013. 10-year US Treasury yields, specifically, ended the year at 1.51% (up from 1.44% a month earlier). Treasury yields started the year at 0.92%. Rising interest rates, as most investors know, have a negative impact on the performance of bonds.

Inflation, obviously, is what’s causing interest rates to increase even though the Federal Reserve has delayed any official change to its benchmark Fed Funds rate. The latest Consumer Price Index (CPI) data showed annual inflation of 6.8%, the highest reading of 2021 (and the highest in nearly 40 years).

 Gasoline prices alone have spiked 58% in the last 12 months. Wages have increased 4.8% over the same period, meaning the cost of living (after inflation) for an average American family is becoming more expensive. If that sounds worrisome be thankful at least you don’t live in Turkey, where a full blown financial crisis includes year-over-year inflation of 36%!

International equities lagged US stocks for the year. Some of that is due to China, where slowing growth and a rash of regulatory crackdowns have hindered the world’s second largest economy. Part of the underperformance is also due to the US dollar strengthening roughly 7% last year versus global currencies.

Non-US Developed equities gained 4.4% in December and 15% for the year. Emerging Markets grew 1.5% in December, but still lost roughly 2% in 2021.

Gold prices increased 3.3% in December.

Here’s to a prosperous year for you and your portfolio in 2022.

 

 

 

Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.