After Omincron, the highest inflation rate in years, supply chain SNAFUs, oil hitting multi year highs and the first significant war of the 21st Century the stock market was on a roller coaster for first Quarter of 2022. After some gyrations, the S&P 500 Index closed March 2022 at 4,530.41, 5.55% below its all-time closing highs according to Bloomberg. The S&P500 was the bright spot. The S&P Mid Cap 400 and S&P SmallCap 600 Indices stood -7.46% and -10.06%, respectively, below their record closing highs as of month-end. The S&P500 rallied 3.71% in March, primarily because of oil related stocks yet only two of the 11 major sectors are up for the year. (Energy +38.99 and Utilities +4.77%). The S&P500 Growth index closed down 8.366%, the Russell 2000 growth index down 12.63% and is now down 23.9% since its high in Feb. 2021. The end of March rally followed a drop in the middle of the quarter. The Dow Jones Index and the NASDAQ index entered bear territory in January followed by the S&P500 in February making this quarter the first in over two years that was negative. In the worst camp, growth was again shunned with the S&P Biotech index being down over 14% for the quarter ( down 29.88% trailing one year) while the Communication Services sector was down 11.92%. The S&P500 and Dow bottomed for the quarter on March 8 down 10.8% and 13% respectively. The NASDAQ bottomed a few days later down 20.5%. The S&P 500 Index exited correction territory on 3/29/22, according to MarketWatch. (An asset does not exit a correction (a 10.00% to 19.00% price decline from the most recent peak) until it rises 10% from its correction low, according to Dow Jones Market Data.) Since 1928, the S&P 500 Index has posted an average gain of nearly 14% one year after exiting a correction, and the index rose approximately 77% of the time.
While stocks had a tough quarter bond indexs had the worst quarter in recent history. The yield on the benchmark 10-year Treasury note (T-note) closed trading on 3/31/22 at 2.34%, up 51 basis points (bps) from its 1.83% close on 2/28/22, according to Bloomberg. This was up from 1.51 at year end and .70% in August of 2020. On a price only basis the 10 year treasury is down 10% and 15%respectively during this period. Through February, inflation, as gauged by the CPI, is running at 7.91% according to the US Bureau of Labor Statistics.
Bloomberg reported at the end of March 2022 that the average U.S. household could end up spending an extra $5,200 this year for the same goods and services they consumed in 2021.
The Federal Reserve reported that the total wealth of the richest 1% (“top 1%”) of Americans increased by $6.5 trillion to $45.9 trillion in 2021, due largely to rising stock prices and financial markets, according to CNBC. The stock portfolios of the top 1% were valued at $23 trillion. The top 1% own a record 53.9% of individually held shares. Overall, the top 1% owned a record 32.3% of the nation’s wealth at the close of 2021. While the stock market is inherently risky, over a long time horizon, equities have proven to be one of the best ways in which to build wealth, according to First Trust Advisors.
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