Some market quarters go by without many remarkable events … this past quarter was not one of those!
Perhaps a Q1-2022 market update should be preceded by a trigger warning, but since we all just experienced it together, let's recap. The New Year was rung in by the emergence of extremely virulent Covid-19 variant, Omicron. Despite being less potent than prior strains, we all felt the impact. Schools, businesses, and airlines in particular struggled with students and teachers being out, employees being forced to quarantine, and customers pulling back on their outings. As we were stuck in our homes in early January, we were bombarded by news of extreme inflation and more supply chain woes. The broader market began to pull back, following the repricing trend we had already started to see in the tech sector.
We watched Canadian truckers clog the streets of Ottawa and Russian troops march through the streets of Ukraine. Fears of war, energy shortages, and further supply chain disruptions were emboldened. Remember the Winter Olympics? Those were less than two months ago, in early February!
By the end of February the combination of war in Ukraine and the extreme market volatility led us to send out a mid-quarter market update as we entered correction territory for the S&P 500. The questions shifted from "if" to "when". At the end of the first week of March the market had given back nearly all of its gains from the prior 12 months, and Crude Oil prices were up nearly 60% just since the start of the year.
In the last few weeks of the quarter things started to shift. Mask mandates were lifted, the market began to rebound, and the Fed raised interest rates for the first time since 2018. To the extent you consider this "good news" is a matter of perspective to be sure! As we enter April there remains a tremendous amount of uncertainty. Comparing the unemployment numbers to wage growth and inflation paints a hazy picture. Higher interest rates also send mixed signals. On a fundamental level we know that prices are more favorable today than they were 90 days ago, but we cannot be certain that there is not more downside risk in the stock market, or in other places like the housing sector. Rest assured we will watch all of this closely and take steps to try and position portfolios appropriately.
With the individual tax deadline just a few days away, we think now is as good a time as ever to review your entire financial picture with your advisor, and make sure that your plan is tailored to balance the uncertainty of the market with your personal needs over the next 12 months.
-Open Door Financial