Special Note: Parts of this newsletter will focus on the economic and market implications of the Russian invasion of Ukraine. While the human toll of this humanitarian crisis is high and cannot be discounted, we believe it is our job to focus on the impact this crisis has on global markets. Our hearts go out to those impacted from this war, including those here at home with loved ones in Ukraine. We hope the war ends soon.
Following a late March rally, stocks struggled again in April with the S&P 500 having its worst month since March 2020. There is a convergence of headwinds for markets right now. The Federal Reserve (Fed) is in the early stages of a rate hike cycle, there are concerns about slowing earnings growth, the latest lockdown in China is adding to worries about supply-chain disruptions and the war in Ukraine continues to add pressure to energy and commodity prices.
The good news is there are reasons to be cautiously optimistic. Valuations are more attractive because of the correction in stock prices, consumer balance sheets are healthy, and business investment and underlying economic fundamentals remain strong.
First quarter earnings trends have been particularly robust. Following favorable corporate guidance, 2Q revisions are already 0.8% above the historical trend. With 275 of S&P 500 companies reporting results, 1Q earnings are beating analysts’ estimates on average by 6.5% with 77% of companies topping projections.
Despite the losses, the S&P 500 is still up 90.7% since the March 23, 2020 COVID-19 bear market low. Since that date, the Dow 30 is up 84.8% and the Nasdaq is up 82.6%. 1
Looking forward, The Federal Reserve continues to be investors’ center of attention. The Fed wrapped up their two-day FOMC meeting on Wednesday 5/4 and hiked the Fed Funds rate by 0.50%, as expected. Powell and markets seem confident the Fed can hit a “soft landing” - taming inflation while normalizing Fed policy. We remain optimistic that inflation is easing and supply chains are improving but expect market volatility to stay elevated as uncertainty is high.
Your well-being is of foremost importance. We will continue to watch the data, listen to what Fed officials are saying for clues and make accessible updates as soon as they are available.
Remember, we are here to help you and your family answer any questions that you may have. As always, feel free to contact me directly at 330-908-1087 or you can e-mail me as well.
Stay healthy, stay safe and stay positive!
1 Morningstar Direct (all performance figures are total return based, which include reinvested dividends).
Investors cannot directly invest in indices. Past performance does not guarantee future results.