The market volatility and uncertainty we experienced at the start of 2022 continued through the end of April. The S&P 500 was down nearly 9% in April, its worst month since March 2020. The tech-heavy Nasdaq was down more than 15%, its worst month since October 2008. It’s clear that investors are anxious, staring at a wall of worries that includes an accelerated pace of Fed rate hikes, elevated inflation and concerning economic signals, all while also navigating a European war and ongoing supply chain issues.
In fixed income, the US 10-Year Treasury Note continued to sell off as yields rose rapidly, finishing the month up at 2.89%, up a half of percent. The Bloomberg Aggregate Index was down another 3.5% during April; the year-to-date return on the Bond Index is -9.5%. As a reminder, yields and bond prices move inversely.
The selloff in equities and bonds was specifically triggered by the hawkish comments by the Fed Chair Jerome Powell at the IMF summit where Powell signaled an increase in the Federal Funds rate of 50bps in May, and possibly in June. Some Wall Street analysts raised their forecasts even further to increases of 75bps in June and July. However, it appears much of the bad news (Fed hikes, inflation) has already been priced into the markets. All ears will be on the statements made by Powell after this month’s Fed meeting to decipher how aggressive they will be in not only raising rates, but also the timing of their balance sheet reduction.
As we have stated many times, the average intra-year pullback in the S&P 500 Index is around 14%, which is about where we stand YTD. While it is unnerving to see portfolio values decline, especially after years of double-digit increases, it is important for investors to maintain traditional disciplines around diversification (across and within asset classes), rebalancing and loss harvesting, while remaining focused on the long-term.
Feel free to reach out to any advisor with Antares Wealth Management to learn more.
Eric Toole, MBA, CFP(R) is a Principal at Antares Wealth Management. He can be reached at firstname.lastname@example.org.