A Sobering Start
Investors were treated to a double dose of negativity in the first quarter as both stocks and bonds declined over the three-month period.
A Sobering Start
Not All Quarters Can Be Positive
The streak is over. After seven consecutive quarters of positive returns, the first quarter of 2022 gave us a return of -5.0% for the Standard & Poor’s 500 Index.
Bond Math 101: Higher Yields = Lower Prices
Not since 1980 has the quarterly return for investment grade bonds been lower than the -6.1% recorded this past quarter.
Equity Returns Keep Going and Going and…
The ascent of U.S. equity returns, like the Energizer bunny, remained undeterred during 2021, exceeding 20.0% for the third consecutive year.
Flat Quarter, Down Year
The Bloomberg Barclays Aggregate Bond Index finished the fourth quarter with a near-zero return of +0.01%. Investment grade corporate bonds posted their second consecutive quarterly loss versus Treasuries despite the S&P 500 finishing at all-time highs.
Evaluating the Variables
For investors, there are numerous variables that can impact the trajectory of movements in the financial markets. Among the more traditional variables are monetary policy, fiscal policy, geopolitical risk and economic growth.
The good news is U.S. equity markets were positive in the third quarter of 2021. This is the sixth consecutive quarter of positive returns from the S&P 500 Index.
Right Back Where We Started
The bond market for the quarter can be described like the journey of a billionaire astronaut, going up then down, and ending in the same place.
Affirming the Moderation
For investors, particularly equity investors, the past 15 months have been extremely rewarding. Over that time, domestic stocks have risen sharply as the Russell 1000 Index of large capitalization domestic stocks returned 34.9% and the small capitalization segment of the domestic equity market, as measured by the Russell 2000 Index, delivered an even more impressive return of 43.4%.
Easing Off the Accelerator
With continued progress being made in the fight against the coronavirus, GDP growth in the United States continues its recovery and has been moving higher at a rapid clip.