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1st Quarter 2022 Market Review

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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