Market Commentary

Newsletter – Quarter 2, 2022

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Investors will likely look back at the 2010s as an ideal period for owning assets.  Valuations were low for many asset classes as we exited the Great Recession of 2008-2009, the economy was recovering – albeit  at a low growth rate, and inflation levels were low and very consistent.  To add to this ideal environment, the Federal Reserve (“Fed”) provided a tailwind to asset prices by keeping interest rates at or near zero while implementing quantitative easing (“QE”), a practice in which the Fed purchases treasuries and mortgage-backed securities.  Every time the Fed attempted to normalize monetary policy by raising rates and reducing QE, markets reacted negatively.  Fearing a deflationary spiral from the decline of asset prices in a highly indebted economy, these adverse market reactions were met swiftly with the Fed reverting back to easy monetary policy.  

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Newsletter – Quarter 1, 2022

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In addition to springing forward an hour for daylight saving time, it seems like the clock has also recently been turned all the way back to the 1970s in some unfortunate ways.  Rampant inflation, an oil supply shock, and Russian military expansionism have all once again reared their ugly heads, injecting significant volatility into global markets and leading to the first correction in the S&P 500 since the early days of the pandemic.

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Newsletter – Quarter 4, 2021

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We are happy to report that stock market returns were above the historical average for the third consecutive year.  However, fixed income returns in 2021 were muted.  Financial markets are discounting mechanisms, meaning that changes in investor expectations about the future either depress or elevate security prices.  As such, one of the year’s most important milestones for financial markets was the fact that, to borrow Winston Churchill’s phrase, we reached “the end of beginning” in the war against Covid.  Although the virus is still with us, the progress that the health care community has made in treating and preventing the disease has made it possible for investors to start looking beyond the pandemic as they evaluate the future.  This progress had a positive impact on the stock market in 2021.

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Newsletter – Quarter 3, 2021

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The many students who have recently returned to school can only hope for grades like the stock market has posted for most of the year.  Over the past several months, the market has successfully shrugged off a number of concerns, including extended valuations, rising inflation, and a slowdown in the economic recovery caused by the Delta variant of Covid-19.  The result has been an unusually steady climb higher by the market for most of the year with just a few minor blips along the way.  In fact, the S&P 500 has doubled since bottoming in March of 2020 without a single 10% correction during that span.  A rise in interest rates represents the latest challenge for stocks and has added some volatility to the market in recent days.  The result has been the first 5% pullback in the market since just before the election last year, ending what had been the second-longest stretch without such a decline over the past 25 years and the 8th longest streak since 1930.  There has also been some choppiness below the market’s surface throughout the year, with bigger fluctuations among various sectors of the market that have come in and out of favor.  However, the market as a whole has been pretty resilient, with the S&P 500 remaining just a handful of percentage points off its high.

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Newsletter – Quarter 2, 2021

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What a difference a year makes!  This time last year, we were in the midst of lockdowns with a recovery in the stock market beginning to form as technology and stay-at-home stocks propelled the market higher off of the March Covid lows.  Now, a year later, the domestic economy has reopened, and cyclical stocks, which benefit from a strong economy, have taken over market leadership. 

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Newsletter – Quarter 1, 2021

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Only in the mercurial world of the stock market would good news be greeted with such turbulence.  While the prospects for economic and corporate earnings growth have become much rosier in recent months, this optimism has been accompanied by an increase in long-term interest rates that has created some additional market volatility.

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Newsletter – Quarter 4, 2020

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It is finally over.  With apologies to President Lincoln’s War Secretary Edwin Stanton, now 2020 belongs to the ages.  Who would have predicted during the dark days of spring that stocks and bonds would end the year at near-record levels, having endured one of history’s shortest bear markets? 

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