Investors have navigated a difficult market all year and the third quarter was no exception. All major indices ended the quarter in bear market territory with the S&P 500, Dow and Nasdaq declining 5.3%, 6.7%, and 4.1%, respectively, from July to September. With the dollar strengthening and the global economy slowing, the MSCI EAFE index of developed markets fell 10% over the same period in dollar terms, while the MSCI EM index of emerging markets pulled back 12.5%. Interest rates jumped with the 10-year Treasury yield climbing above 4% on an intra-day basis, the highest level since 2008. The challenges of persistently high inflation and slowing growth have continued to impact the expectations of both investors and policymakers.
In the first quarter of 2022, investors felt the return of stock market volatility. Headlines ranging from COVID variants, increased inflation, Fed Reserve rate hikes, and the war in Ukraine have all caused violent swings in the stock market. The S&P 500 saw one of the worst starts to a new year as it dropped 11% in the first 16 days of the new year (source: Bloomberg News, 2022) as seen in the chart below. The market has since played a game of ping-pong with violent down trends, followed by reprieve in recovery rallies. The S&P 500 saw a total draw down in the quarter of -14% but finished down -4.6%.
The third quarter of 2020 continued right where the second quarter left off with a continued upswing in the S&P 500 in both July (+5.51%) and August (+7.01%). The market's largest headline included a 4-1 stock split by Apple (AAPL) and a continued rally in the technology sector. September was a month riddled with volatility and finished down (-3.9%) as the market saw a mixture of Coronavirus-related headlines and suspected profit taking causing some rather large down days. The S&P 500 finished up 8.5% for the quarter and is up 4.1% YTD.
We hope that this message finds you well and that you enjoyed the summer. As we start the fourth quarter of 2021, we wanted to provide some brief commentary on the state of the stock market and the economy.
With COVID-19 cases surging in some states and uncertainty abound, sometimes it can be best to take a look at the past to guide investor's moving forward. Throughout history, there have always been reasons to not invest. The chart below includes a World War, the Great Depression, multiple other expensive and traumatic military conflicts, a dozen or so recessions and the current global pandemic. However, $1,000 invested in the S&P 500 in 1928 would be worth $169,428 today which would give an investor an annualized 6% compound return before dividends .
If you have been tuning into financial news or reading the Wall Street Journal lately, you may have noticed the word “inflation” appearing quite often in the past few months. The long period of low interest rates and the influx of stimulus has investors anticipating that inflation may be inevitable. We hope to help you understand what inflation is and how it affects you and your financial plan:
After a sharp rebound in April, off of the March lows, May continued to show strength in a stock market rally as the S&P 500 was up 4.5% month over month. May's rally was largely fueled by the positive news of progressing vaccine trials and hopes for a fast-tracked vaccine, which could be available by the end of 2020 in a best-case scenario. This news coupled with the reopening of many states' economies fueled optimism that the US economy is bottoming and starting recover from a deep decline in economic activity.
For informational purposes only. Not intended as legal, tax, or investment advice, or a recommendation of any particular security or strategy. Please contact your legal or tax professional for more information regarding your individual circumstances. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in the above commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. Past performance is not indicative of future results. For more information about Souders Financial Advisors, including our Form ADV Part 2A Brochure, please visit https://adviserinfo.sec.gov or contact us at 513-598-2400.
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