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Market Commentary - April 2022

The global equity and fixed income markets suffered negative returns as volatility surged and investors’ attention was drawn to Russia’s invasion of Ukraine, surging inflation and the Federal Reserve’s tighter monetary policy stance, among other items.

Below are a few highlights:

  1. Major equity markets around the world experienced negative returns in the first quarter ranging from -4.6% for the S&P 500 to -5.8% for the developed international equity market (MSCI EAFE). Other global equity markets trailed the US.
  2. In 2021, US corporate profitability was the highest ever recorded since 1950. This year’s profits are expected to continue to trend upward albeit at a slower pace than 2021. Overall, the US economy is continuing to show economic expansion and we don’t foresee that changing for the remainder of the year.
  3. The Fed has begun to raise interest rates and has outlined a path to a Fed Funds target of 1.875% from the current 0.33% by year-end.
  4. The fixed income markets experienced their worst quarter since 1980 as the Bloomberg US Aggregate Bond Index fell 5.9%.
  5. Real assets/infrastructure investments were the sole bright spot, gaining 7.5% during the first quarter, as measured by the S&P Global Infrastructure Index.

For the beginning of 2022 we see a continuation of economic expansion; below is our preliminary Outlook:

  • For 2022, we continue to expect corporate profits to expand by approximately 8%–10%.
  • The US consumer should continue to remain a driving force behind economic growth as warmer weather, fewer Covid restrictions and a return to the office help adjust spending patterns toward travel, leisure and more service-oriented opportunities.
  • We expect inflation to begin to trend lower in the second half of the year.
  • We do not foresee the US economy contracting in 2022.
  • We expect volatility to remain elevated, and are prepared for choppy, sideways-moving markets where sentiment at times overtakes fundamentals.
  • Real assets and alternative Investments such as market neutral, hedged equity and private debt strategies offer return potential and a buffer against rising interest rates, along with valuable portfolio diversification.

If you would like to read the complete commentary from our Investment Strategy Group, Quarterly Market Commentary for April 2022 – Do Not Underestimate the Us Consumer, click below:

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