Although equity markets remain front-of-mind for most investors, the inflation we are experiencing and the Fed’s efforts to rein it in by raising rates has major implications in bond markets, as well. While all US Treasury rates have increased so far this year, short and intermediate term rates (dark and light green lines, respectively) have risen dramatically. Bond prices move in the opposite direction as interest rates, so the rising rate environment has also translated into a difficult environment for bond investors so far this year.
Through the end of April, we have experienced 42 days this year in which the index has advanced or declined more than one percent, with negative days easily outpacing positive days – 24 versus 18. Those numbers are below the calendar year average, but we are only one-third of the way through 2022. When you annualize the data, we are on a pace to experience 126 days in which the index moves +/-1%, with 72 of those days being negative (both significantly above average).
| Time Period | Negative Days | Positive Days | Total Days |
|---|---|---|---|
| 2000-2021 Avg. | 33.8 | 35.4 | 69.1 |
| 2022 YTD Annualized | 72.0 | 54.0 | 126.0 |
Below, we have illustrated the data in graphical format. The blue line represents days in which the index moved more than one percent in either direction, the red line captures negative days, and the green line captures positive days. The horizontal lines represent annual averages for each from 2000-2021. The 2022 annualized volatility figures, if the pace continues, are rivaled only by 2002 (Dot-Com Bubble popping) and 2008 (Great Financial Crisis) in terms of volatility and down days.[3]
In summary, it has been a volatile start to the year statistically speaking. However, it is important to remember that the turbulence we are experiencing this year comes after a strong stock market rally out of the pandemic lows of 2020. As a result, we continue to recommend that clients stick to long-term plans, while we continue to search for attractive investment opportunities that can arise during volatile periods.
Prices & Interest Rates
| Representative Index | Current | Year-End 2021 |
|---|---|---|
| Crude Oil (US WTI) | $110.61 | $75.37 |
| Gold | $1,886 | $1,828 |
| US Dollar | 103.66 | 95.67 |
| 2 Year Treasury | 2.72% | 0.73% |
| 10 Year Treasury | 3.12% | 1.52% |
| 30 Year Treasury | 3.23% | 1.93% |
| Source: Morningstar, YCharts, and US Treasury as of May 7, 2022 |
Asset Class Returns
| Category | Representative Index | YTD 2022 | Full Year 2021 |
|---|---|---|---|
| Global Equity | MSCI All-Country World | -14.2% | 18.5% |
| Global Equity | MSCI All-Country World ESG Leaders | -15.3% | 20.8% |
| US Large Cap Equity | S&P 500 | -13.1% | 28.7% |
| US Large Cap Equity | Dow Jones Industrial Average | -8.9% | 21.0% |
| US Small Cap Equity | Russell 2000 | -17.8% | 14.8% |
| Foreign Developed Equity | MSCI EAFE | -14.5% | 11.3% |
| Emerging Market Equity | MSCI Emerging Markets | -15.8% | -2.5% |
| US Fixed Income | Bloomberg Barclays Municipal Bond | -9.5% | 1.5% |
| US Fixed Income | Bloomberg Barclays US Agg Bond | -10.5% | -1.5% |
| Global Fixed Income | Bloomberg Barclays Global Agg. Bond | -12.4% | -4.7% |
| Source: YCharts as of May 7, 2022 |
[2] Source: YCharts
[3] Source: YCharts (data as of April 30, 2022)