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.

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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.

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