Weekly Stock Market Recap I S&P 500 Monthly Summary April 2022

April 29, 2022 Weekly Equity Market Recap. The broad equity market S&P 500 plunged nearly -9% in April, its worst monthly decline since March 2020, and also marked the biggest four-month loss  period (-13.3%) to start a calendar year since 1939.  While earnings season appears healthy, stocks are being negatively impacted by CEO quarterly comments on inflation rising purchasing costs and supply chain constraints and bottlenecks. The trading week was also derailed by news that GDP shrank 1.4% annual rate in the first quarter.  

April 23, 2022 Weekly Equity Market Recap. Equity indexes posted a third week of losses: S&P -2.8%, Nasdaq -3.8% and Dow Jones -1.9%.  The catalyst for this week’s losses is largely tied to Fed Chair Jerome Powell indication that he sees the case for front-loading interest rate hikes with 50 basis-point increases in order to quickly address persistent inflationary pressures. The market hasn’t seen the combination of an oil shock, a commodity price shock, soaring inflation, rising rates, a yield curve inversion, the Fed's transition from accommodative to tighter monetary policy, supply constraint shocks, trade disruptions and regional war with a nuclear power that could become similar in scope to those faced in WWI.  Historically reliable indicators that have been already flashing red. As Goldman Sachs’ economists pointed out, 11 out of the 14 Fed tightening cycles since World War II have been followed by a recession within two years.  For clients, we have already executed a number of defensive portfolios moves as we have to stay on our toes and watch a large number of factors for impact by watching all kinds of macro and fundamental developments. I would expect additional flight to safety trade actions are to be expected in the first half of this year.

April 15, 2022 Weekly Equity Market Recap. For the week, the Nasdaq fell 2.6% and the S&P 500 lost 2.1%, with both booking a second-straight week of losses; the Dow Jones shed -0.8%, recording a third-straight week of losses. Equity markets continue to lose ground on inflation and recession fears, and the latest reading of producer prices only added to these concerns by jumping to the highest on record, of 11.2%. This beg to question whether companies can keep passing all of this along to consumers without decline in demand, which would certainly be a catalyst for early-on recessionary pressures. Similarly on the inflation front, the Bureau of Labor Statistics' (BLS) Consumer Price Index (CPI) rose 8.5% in March compared to the same month last year, which marked the fastest rise since December 1981. Fortunately, for 2022 our client portfolios show increases in cash, energy, commodities, precious metals, loss buffer equity ETFs and absolute funds with strategy returns that are more independent of the stock market behavior. We also had sharply cut fixed income holdings early on which has been significant in avoiding much of the -7.87% year-to-date loss experienced by the bond index, iShares Core US Aggregate Bond (AGG).
​
April 9, 2022 Weekly Equity Market Recap. For the week, the Nasdaq fell 3.6% and the S&P slipped 1.3%, the worst declines for both indexes in a month, while the Dow Jones edged lower by 0.3%.  All US equity indexes declined on Fed news of almost predetermined +0.5% interest rate hike this month and the unwinding of the central bank’s balances at a pace of $95 billion a month starting next month. Goldman Sachs Chief Economist said the Fed may need to hike rates past 4% to cool an overheated economy, which will add ongoing price pressure on existing bond holdings but better future yields down the road. The yield on the benchmark 10-year Treasury note rose for a sixth straight day to 2.71%, the highest in more than three years, and the two-year yield climbed to 2.51% to wrap up its biggest five-week yield gain since May 1987. I think there is little doubt that the stock market is going to have navigate a very challenging environment of rising cost of capital together with liquidity drains (Fed selling balance sheet securities) in a landscape of heated inflation and slowing economic growth. According, Deutsche Bank this week warned that the Federal Reserve's rising interest rates would trigger a U.S. recession beginning late next year while BofA called for further declines in the S&P 500: “inflation shock is worsening, the rates shock is just beginning, and the recession shock is on its way and expects the S&P 500 drop below 4,000 this  year." That is a call of about -11% broad stock market drop from Friday’s close. Further, with most investors (not our clients) holding a traditional portfolio of bonds and stocks, they are being crushed this year with aggregate bond index -7.8%, S&P 500 -5.8%, Nasdaq -12.4%. Fortunately, we dramatically lowered bond allocation holdings at the beginning of the year, added more loss buffer ETFs along with energy, gold and commodities. Further, client portfolios already benefit from several absolute return funds that are not very correlated to stocks and bonds. That said, this week we intend to add to energy while also buying two new absolute return ETFs and another loss buffer ETF; we will also be selling some risk assets to increase portfolio cash weightings. 

April 2, 2022 Weekly Equity Market Recap. Marking a third weekly stock market gain, the S&P 500 rose 0.1% and the Nasdaq gained 0.7% as unemployment continues to reach new lows at 3.6%.  Expectations for a 50-basis point interest rate hike at the central bank's May meeting rose to 73.3%, according to CME's FedWatch. This helped move the 2-year and 10-year Treasury yields inverted for the first time since 2019 on Friday morning, sending a possible warning signal that a recession could be on the horizon. The bond market phenomenon means the rate of the 2-year note turned higher than the 10-year note yield. There has been a better than two-thirds chance of a recession at some point in the next year and a greater than 98% chance of a recession at some point in the next two years. On average, the market declines 5.3% during an economic recession, a loss figure that is reminiscent of where equity values currently stand on the year.  A positive offset, however, is a record $319 billion of share buybacks have been authorized so far in 2022, compared to $267 billion at the same point last year, according to Goldman Sachs.

March 31, 2022, Quarterly Stock Index Returns. For the first quarter, the Dow Jones and S&P 500 closed down 4.6% and 4.9%, respectively, while the Nasdaq lost 9%. For the three major averages, this was worst period since early 2020.  Given all major U.S. equity indexes were in correction territory at one point during the quarter, bleeding greater than -10% losses, the silver lining is March brought a partial rebound. However, for those investors holding the most common traditional equity-bond portfolio, the bonds exacerbated the portfolio losses with the iShares Core US Aggregate Bond Index finishing -5.85% for the first quarter of 2022.  Fortunately for our clients, we added several portfolio hedges in the form of precious metals, commodities, energy and inflation-protected securities, while also increases in cash.
​