As we’re experiencing, stock markets are having a rough start to the year. And there haven’t been many places to hide as the tables below show.
*Source – Y Charts Market Update Data – Year to Date Performance (1/1/2022-4/30/2022)
There are a number of reasons for this negative performance.
While this may paint a depressing picture, I will remind you of the resiliency of markets. Take the chart below for example:
As you can see, there has been a much wider variance of returns over shorter periods of time and returns have been positive for every category over the 20-year time period.
So yes, that may be the anticipated “stay the course”, it’s a long-term approach, piece of advice, but reminders can be helpful during times of negative performance.
And there are some items we can remain hopeful about in the short-mid term outlook as well.
Pent Up Demand
There is still pent up demand in the economy. Society is still slowly opening back up from Covid shut downs and as we continue to get through Covid variants, we should see more economic activity.
Additionally, businesses are trying to hire but unemployment has been at very low levels. Available jobs are at historically high levels. People haven’t been able to buy new vehicles because of lack of inventory. Housing supply isn’t meeting demand. The list could go on of supply issues. Fortunately though, the economy and free markets have a way of resolving issues like this. As new homes, vehicles and workers enter the economy, we would expect economic growth accordingly.
The other positive note to add is that things change. China will eventually come out of their Covid lock down. The global economy will adjust to the war in Ukraine. Let’s hope and pray for an end as soon as possible, but until then, the economy will adjust. We will look for alternative energy and commodity solutions to help with rising costs. Right now we are in a rising interest rate environment. As inflation calms down, rate hikes should as well. As this happens and as uncertainties go away, the markets could react positively.
Of course there is no simple answer for investing. There are areas of concern but it’s not all doom and gloom. As we navigate the considerations laid out above, we have a few areas of focus on our minds for you and your portfolios.
So while 2022 has been off to a down start and there are still future uncertainties, there are still a lot of opportunities and reasons to be optimistic for your long term investments.
Of course each investor is unique and no investment change should be solely based off of this commentary. Please reach out to your advisor if you would like to further discuss your portfolio and your appropriate strategy.
Impact Financial, LLC (“Impact Financial”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Impact Financial and its representatives are properly licensed or exempt from licensure. This article provides general information and should not be taken as advice or a specific recommendation. Please consult with a trusted advisor to receive advice specific to you.
Y Chart Source Data is based off of the following indices:
US Stock – Russell 3000 Total Return, Global Stock Ex US – MSCI ACWI Ex USA Net Total Return, US Bond – Bloomberg US Aggregate, Global Bond – Bloomberg Global Aggregate, US Real Estate – Dow Jones US Real Estate Index Total Return
US Stock – Russell 3000 Total Return, Global Stock Ex US – MSCI Ex USA Net Total Return, Emerging Markets – MSCI Emerging Markets Net Total Return, Europe Stock – MSCI Europe Net Total Return, Asia Pacific Stock – MSCI AC Asia Pacific Net Total Return, Latin America Stock – MSCI Emerging Markets Latin America Net Total Return
Large Growth – CRSP US Large Cap Growth Index Total Return. Large Blend – CRSP US Large Cap Index Total Return, Large Value – CRSP US Large Cap Value Index Total Return, Mid Growth – CRSP US Mid Cap Growth Index Total Return, Mid Blend – CRSP US Mid Cap Index Total Return, Mid Value – CRSP US Mid Cap Value Index Total Return, Small Growth – CRSP US Small Cap Growth Index Total Return, Small Blend – CRSP US Small Cap Index Total Return, Small Value – CRSP US Small Cap Value Index Total Return
May 4, 2022