A little perspective on our economy and the markets….
2019 ended with the S&P 500 at 3230. Covid shut the world down, pushing the S&P down to 2584 on March 31st 2020. As of last Friday February 25, 2022, the S&P closed at 4384. We’ve obviously done a lot of healing from the depths of the Covid-induced recession.
The unemployment rate is @ 4%. 4th Quarter 2021 GDP was up 7%. Yes, there was a significant amount of stimulus employed by both the Federal Reserve and our government, that has caused significant inflation, which is now being temporarily masked by Russia/Ukraine.
Do I believe our healing has come to an end? The short answer is NO. I do believe the process of healing will temporarily slow, as we have many unknowns lurking around the corner. From Russia to the Fed, and many issues in-between, uncertainty is here. Certainly anything “nuclear” is a game changer. If the worst was to happen, our portfolios, most likely, would be the least of our concerns.
Have we hit a stock market bottom? Many are suggesting we have, and the time to buy stocks is with the “first shot of the cannons.” I don’t necessarily agree as that would be an absolute guess! As always, time will tell us the answer. Of course, I hope the bottom is in!
Looking back over my 38 years in the financial services industry, it’s hard to find a time the economy and stock market were perfect! The economy and the markets repeat going from trough to peak over and over again. Technological advances, a growing population, and the ultimate desire for consumption has led us out of those troughs. I started the financial services industry in 1984; did we have cell phones or computers?
I’m not suggesting the path from here will be straight or easy. Transitioning from stimulus to tightening is a speed bump. Always seems a better ride, when we slow down as we approach the speed bump in the road. The Russia/Ukraine issue has the ability to slow us further, in the short run.
When it comes to your investments, focus on your time horizon and overall allocation, making sure the money needed for short-term consumption is secure. Your retirement time horizon is your life expectancy!!
Last week witnessed a lot of volatility however most US indexes ending the week in the black, with S&P 500 up .84%, the Nasdaq rising 1.10% and the Russell 2000 leading the way, up 1.59%. The Dow was flat (.03%).
Over the pond, foreign stocks took it on the chin, dropping (2.49%) and emerging markets doing the same, down (4.84%). Definitely not a surprise.
Bond yields remained somewhat firm with the 10-year yield ending the week @ 1.98%. For now, we may witness a flight to quality in US Treasury’s and tax–frees until the simmer down of Russia.
The short-run will definitely be impacted by the actions of the Fed. Prior to Russia/Ukraine, our focus was on how quickly Powell would raise rates. That hopefully will remain the primary focus, however I’m very curious to hear if the current situation will influence his pace of rate hikes!!