Market Reviews 2022

The US stock market began November strongly, continuing its upward momentum from October. Economic indicators and corporate earnings results were favorable, and the monthly employment report for October was particularly strong. By mid-month, several major market indices were trading at all-time record levels. Some market participants, however, expressed concern that the past several months’ upsurge in inflation might prove more persistent than feared, and Federal Reserve Chair Jerome Powell shifted in his public statements regarding inflation, saying that the term “transitory” was no longer appropriate. He also signaled that the Fed may reduce its rate of purchases of fixed income securities sooner, and more sharply, than previously expected. In addition, over the weekend after Thanksgiving, news of a new and potentially threatening Covid variant, Omicron, appeared, sparking a market selloff sharp enough to more than offset the gains from earlier in the month. The S&P 500 index returned -0.69% for the month of November. Smaller stocks fared even worse, as the Mid-cap 400 index returned -2.94%, and the Small-cap 600 index returned -2.29%. [Index returns: Standard & Poors]

Overseas stocks also sold off late in the month, and the MSCI EAFE international equity index returned -2.51% in local currencies. While the US dollar slipped a bit against the Japanese yen, ending the month 113.22 yen compared to its October 31 level of 114.03, the Fed’s more hawkish (that is, inclining toward tighter or more restrictive monetary policy) tone strengthened the dollar against the pound Sterling and the euro. At November 30, $1.1287 bought one euro and $1.3252 one pound, compared to month-earlier levels of $1.1556 and $.1386. (Recall that by market convention, we quote the dollar-yen rate as the number of yen to buy one dollar, but we quote the pound and euro in terms of the number of dollars to buy the other currency. Higher figures in the yen quotation denote dollar strength, but for the pound and euro, lower figures denote dollar strength). The dollar’s overall strength worked against US investors holding foreign securities, and EAFE returned -4.65% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 releases]

After giving up ground in September, the US equity market reversed course and advanced strongly in October. The monthly employment report for September was tepid, logistical and supply-chain constraints continued to bedevil a wide range of businesses, and the recent bout of inflation began to show signs of unwelcome persistence. But corporate earnings reports proved surprisingly robust. In addition, the recent surge in Covid infections seemed to abate in October, and while Federal Reserve officials shifted their message somewhat to indicate that they may begin the process of normalizing monetary policy before too long, they seem to have persuaded market participants that they are not about to make any sharp, jarring moves. Stocks responded strongly, with the S&P 500 index returning +7.01$ for the month. Again, however, the advance rested heavily on the largest growth stocks. The Mid-cap 400 index returned +5.89%, and the Small-cap 600 index returned +3.43%. [Index returns: Standard and Poors]

Overseas stocks also advanced, although not so dramatically. The MSCI EAFE international equity index returned +2.18% in local currencies. The US dollar ended mixed against other currencies. It advanced strongly to 114.03 yen, from 111.5 at the end of September, but it weakened to $1.3686 per pound Sterling, from a September 30 level of $1.3470. It changed little against the euro, ending October at $1.1552 to that unit, from $1.1577 a month earlier. EAFE returned +2.46% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The upward momentum of the US stock market faltered in September, halting several months of steady advances. The recent resurgence in Covid-19 infections has raised concerns that economic growth may soften in coming months, and businesses have increasingly reported difficulty in obtaining raw materials and other supplies, as ports have become congested and transportation channels, particularly in trucking, suffer from labor shortages. Upward pressures on prices and wages have also persuaded some market participants that tighter monetary policy may be on the horizon. Political posturing over the need for Congress to increase the US Treasury’s borrowing authority has also contributed to investor nervousness. The S&P 500 index fell by -4.65% for the month. Smaller stocks did a little less poorly, with the Mid-cap 400 index returning -3.97%, and the Small-cap 600 index returning -2.43%. [Index returns: Standard and Poors]

International stocks also fell. The MSCI EAFE international equity index returned -1.30% during the month. The possibility of monetary tightening lifted the US dollar. It advanced to 111.50 yen at September 30, from 110.05 at August 31. The dollar also strengthened to $1.1577 per euro and $1.347 per pound Sterling, from levels of $1.1800 and $1.3747, respectively, at the end of August. The currency effect worked against US holders of foreign stocks (by making foreign stocks cheaper in dollars), and EAFE returned -2.90% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The US equity market continued its upward drift during July and August, with major indices ending August near all-time highs. Economic indicators were generally encouraging, as were corporate earnings reports. Overall, they created a picture of an economy recovering fairly well from last year’s pandemic-induced recession. That said, reason for caution remained. The advance stalled, and then reversed, in September. A sharp resurgence in COVID-19 infections and hospitalizations beginning toward the end of the July raised worries that the public health situation could deteriorate sufficiently to stall the recovery. In addition, sharp increases in prices in some parts of the economy, including some commodities along with consumer goods such as cars, have led some market participants to fear a resurgence of persistent inflation. Businesses have also increasingly reported difficulty in obtaining raw materials, semiconductors, and other supplies, as ports have become congested and transportation channels, particularly in trucking, suffer from labor shortages. Political posturing over the need for Congress to increase the US Treasury’s borrowing authority also contributed to investor nervousness. The S&P 500 returned just +0.58% for the quarter, while smaller stocks lost ground. The Mid-cap 400 index returned –1.76%, and the Small-cap 600 index returned –2.84%. [Index returns: Standard & Poors]

International stocks followed a similar trajectory, and the MSCI EAFE international equity index returned +1.32% in local currencies. Meanwhile, the US dollar strengthened. It rose to 111.50 yen, from 111.05 at the end of June. It also strengthened to $1.1577 against the euro and $1.3470 against the pound Sterling, from June 30 levels of $1.1848 and $1.3806, respectively. With the currency movements, EAFE returned –0.45% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

Inflation worries added to perceptions that US monetary policy may tighten in coming months, pushing interest rates higher in August and September, after they had fallen in July. The yield on the two-year Treasury ended the quarter at 0.28%, up from 0.25% at June 30, while the ten-year yield rose to 1.52%, from 1.45%. The Bloomberg Barclays US Aggregate Bond index returned just +0.05% for the quarter. [Index returns: Bloomberg; bond yields: US Treasury]

The US stock market continued its eerily calm advance during August. A strong July employment report, among other generally favorable economic reports, combined with solid corporate earnings to support the advance. Indications that inflation remains elevated raised concerns that the Federal Reserve may throttle back on its monetary accommodation earlier than expected, but remarks by Fed Chair Jerome Powell at the annual Jackson Hole central bankers’ conference allayed those concerns. An increase in the incidence of infections with the Delta variant of SARS-Cov-2 has also introduced a bit of uncertainty into the prospects for continuing economic recovery, but so far investors seem inclined to look past that surge. The S&P 500 index again touched all-time highs toward the end of August, and finished the month with a return of +3.04%. In keeping with the pattern of recent months, smaller stocks were not quite so strong, but the Mid-cap 400 index still gained +1.95%, and the Small-cap 600 index returned +2.02%. [Index returns: Standard and Poors]

International stocks also participated in the general market strength. The MSCI EAFE international equity index returned +2.25% in local currencies. Despite the Fed’s signals of continuing accommodation, the US dollar strengthened modestly against other currencies. It ended August at 110.05 yen, up from 109.74 at the end of July. It also strengthened to $1.1800 against the euro, from $1.1864 a month earlier, and to $1.3747 against the pound Sterling, from $1.3913 at July 31. The currency movements shaved a bit from US investors’ gains on foreign stocks, but EAFE still returned +1.76% in US dollars for the month. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The US equity market generally continued its upward drift during July, with major indices ending the month near all-time highs. Economic indicators were generally encouraging, as were corporate earnings reports. Overall, they created a picture of an economy recovering fairly well from last year’s pandemic-induced recession. That said, some reason for caution still remains. A sharp resurgence in COVID-19 infections and hospitalizations toward the end of the month raised some worries that the public health situation could deteriorate sufficiently to stall the recovery. In addition, sharp increases in prices in some parts of the economy, including some commodities along with consumer goods such as cars, have led some market participants to fear a resurgence of persistent inflation. Finally, while the S&P 500 returned +2.38%, a relatively small number of the largest, highest-growth issues contributed heavily to that result. The Mid-cap 400 index returned just +0.35%, and the Small-cap 600 index fell, losing -2.39% for the month. [Index returns: Standard & Poors]

International stocks also advanced a bit. The MSCI EAFE international equity index gained +0.40% in local currencies. The US dollar slipped against other currencies, in part because the Federal Reserve gave indications that despite the appearance of price pressures, they are likely to continue their accommodative monetary stance for some time. The dollar slipped to 109.70 yen from its June 30 level of 111.05. It also eased to $1.1864 against the euro and $1.3913 against the pound Sterling, compared to month-earlier levels of $1.1848 and $1.3806, respectively. The currency movement elevated EAFE’s return to +0.75% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release.]

The US stock market continued to exhibit an optimistic tone during the second quarter. Economic indicators, including corporate earnings reports, were mostly favorable, and the news concerning progress toward curbing further spread of COVID-19 and reopening the economy was generally, although not uniformly, good. The recent COVID relief legislation seems to have helped, and the Federal Reserve continues to signal accommodative monetary policy. Reports that the Administration may propose a large increase in capital gains taxes for the wealthiest taxpayers excited comment, but had little effect on the market. Stock indices reached a plateau during April, and generally remained strong for the rest of the quarter. In some areas, including semiconductors, housing, and energy, demand has rebounded faster than supply, resulting in unusually sharp price increases. Some of these effects will most likely prove to be transitory, in Fed Chair Powell’s preferred term, but increased inflation now seems to be a possibility. Accordingly, after the mid-June Fed Open Market Committee Meeting, Mr. Powell allowed that the Fed is now “thinking about thinking about” raising rates. Erratic movements in speculative stocks, along with cryptocurrencies, seemed to some observers to be a sign that momentum in those portions of the market has run its course. The S&P 500 index returned +8.55% for the quarter, with a handful of the largest stocks leading the advance. The Mid-cap 400 index returned +3.64%, and the Small-cap 600 +4.51%. [Index returns: Standard & Poors]

International stocks also advanced, as the MSCI EAFE international equity index returned +4.79% in local currencies. The US dollar initially eased, before strengthening in June. Overall, the dollar rose to 111.05 yen, from 110.61 at the end of March. It slipped a bit, to $1,1848 against the euro and $1.3808 against the pound Sterling, from March 31 levels of $1.1743 and $1.3795, respectively. With the currency movements, EAFE returned +5.17% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]advanced, as the MSCI EAFE international equity index returned +4.79% in local currencies. The US dollar initially eased, before strengthening in June. Overall, the dollar rose to 111.05 yen, from 110.61 at the end of March. It slipped a bit, to $1,1848 against the euro and $1.3808 against the pound Sterling, from March 31 levels of $1.1743 and $1.3795, respectively. With the currency movements, EAFE returned +5.17% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The US Treasury yield curve flattened considerably during the quarter, perhaps reflecting an increased chance of a Fed-driven increase in short-term rates, and a resulting decrease in future inflation. The yield on the two-year Treasury ended the quarter at 0.25%, up from 0.16% at March 31, while the ten-year yield fell to 1.45%, from 1.74%. The Bloomberg Barclays US Aggregate Bond index returned +1.83% for the quarter. [Index returns: Bloomberg; bond yields: US Treasury]

As May began, US equity markets seemed set to pause at their recent highs, or even to fall back a bit. Economic data were mixed, with employment reports showing some weakness, and price indices showing possible signs of incipient inflation. Increases in commodity prices, in particular, raised concerns in some circles that they might represent a trend that would force the Federal Reserve to tighten monetary policy earlier than previously anticipated. Various Federal Reserve officials made comments reducing fears that the central bank might act swiftly, but a couple made remarks suggesting a subtle shift in tone toward “thinking about thinking about” raising rates. Erratic price movements in some more speculative stocks, along with cryptocurrencies, also seemed to some observers to be a sign that recent momentum in those portions of the market has run its course, at least for now. Despite the noise and cross-currents, the S&P 500 index gained +0.70% for the month. The gain was far from uniform, though – value stocks advanced, while growth stocks fell. The Mid-cap 400 index eked out a gain of 0.20%, and the Small-cap 600 index advanced by +2.08%. [Index returns: Standard and Poors]

Global stocks had a somewhat better month, with the MSCI EAFE international equity index returning +2.08% in local currencies. The dollar gained a bit, to 109.83 yen, from 109.33 at the end of April, but it fell sharply against European currencies. As trading closed for the holiday weekend, the dollar stood at $1.2194 against the euro and $1.4188 against the pound Sterling, notably weaker than its April 30 prices of $1.2030 per euro and $1.4188 per pound. EAFE returned +3.26% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The US stock market continued to exhibit an optimistic tone in April. Economic indicators, including corporate earnings reports, were mostly favorable, and the news concerning progress toward curbing further spread of COVID-19 and reopening the economy was generally, although not uniformly, good. The near-term effects of the recent COVID relief legislation seem to be salutary, and while some market participants and economists have expressed concern that the longer-term effects may be inflationary, the Federal Reserve has continued to signal, and to execute, an accommodative monetary policy. News reports that the Administration is contemplating proposing a large increase in capital gains taxes for the wealthiest taxpayers excited significant comment, but had relatively little effect on the market. The S&P 500 touched record highs, and even though it eased a bit at the end of the month, it returned +5.34% for April. Smaller stocks also advanced, though not quite so strongly. The Mid-cap 400 index returned +4.50%, and the Small-cap 600 index returned +2.04%. [Index returns: Standard and Poors]

Global equities also finished a bit higher, but lagged their US counterparts, partly because of somewhat more tepid economic recoveries and slower progress against the pandemic – particularly in India, where the situation has grown grave. The MSCI EAFE international equity index returned +1.26% in local currencies. The US dollar gave ground, easing to 109.33 yen from 110.61 at the end of March. It also weakened to $1.2030 against the euro and $1.3878 to the pound Sterling, from March 31 levels of $1.1743 and $1.3795, respectively. EAFE returned +3.01% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

Long-term interest rates eased a bit during the month, reinforced by accommodative action and language after the meeting of the Federal Open Market Committee toward the end of the month. The yield on the two-year US Treasury note stayed unchanged at 0.16%, but the ten-year yield slipped to 1.65%, from 1.74% at the end of March. The Bloomberg Barclays Core US Aggregate Bond Index returned +0.79% for the month. [Index returns: Bloomberg; yields: US Treasury]

The US stock market initially pulled back from the strong gains it made in the final stretch of 2020, but then stabilized. Investors shrugged off the disorderliness of the transition to the new Administration, including the violent assault on the US Capitol on January 6. They seemed to focus instead on prospects for additional fiscal stimulus, and indications of progress in vaccinating more of the US population against SARS-Cov-2. The market reached a plateau around the inauguration, but in the last week of January, unusually active trading in a number of low-priced stocks, particularly GameStop (GME), introduced a surprising level of volatility. Stocks gained in February and March, as investors expressed hope for a strong economic recovery in coming months, although many also expressed concerns of possible increases in inflation on the horizon. Interest rates rose sharply, particularly at longer maturities. The result was that shares of a number of large, fast-growing companies — mostly in technology and related areas — that had enjoyed a long period of upward momentum faltered, while more cyclical, value-oriented issues, particularly in finance and energy, performed very strongly. Because of the unusual divergence in performance across sectors and investment styles, the market may have seemed weak to some investors, but in fact the S&P 500 index returned +6.17% the quarter, closing at a record level. Smaller stocks did even better, particularly in January and February. The Mid-cap 400 returned +13.47% for the quarter, and the Small-cap 600 +18.24%. [Index returns: Standard & Poors]

International stocks also advanced strongly, as the MSCI EAFE international equity index returned +7.59% in local currencies. A strengthening in the US dollar accompanied the rise in interest rates: The dollar rose to 110.61 yen, from 103.19 at the end of December. It also strengthened to $1.1743 against the euro, from a December 31 level of $1.2230. It slipped a little, to $1.3795 against the pound Sterling, from $1.3662 three months earlier. With the currency movements, EAFE returned +3.48% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The rise in interest rates was particularly pronounced at longer maturities. While that was favorable for shares of banks, it caused the Bloomberg Barclays US Aggregate Bond index to fall by –3.37% for the quarter. The yield on the two-year Treasury ended the quarter at 0.16%, up from 0.13% at December 31. The ten-year yield rose to 1.74%, from 0.93%, a continuation of the recent steepening of the yield curve. [Index returns: Bloomberg; bond yields: US Treasury]

Equity markets continued to advance during March, but the tone of the market shifted dramatically. As longer-term interest rates ticked upward, shares of a number of large, fast-growing companies – mostly in technology and related areas – that had enjoyed a long period of upward momentum faltered. Investors expressed hope for a strong economic recovery in coming months, while many also expressed concerns of possible increases in inflation on the horizon. Accordingly, more cyclical, value-oriented issues, particularly in finance and energy, performed very strongly. Because of the unusual divergence in performance across sectors and investment styles, the market may have seemed weak to some investors, but in fact the S&P 500 index returned +4.38% for the month. The Mid-cap 400 index returned +4.67%, and the Small-cap 600 +3.33%. [Index returns: Standard and Poors]

The stock market advance was once again global. The MSCI EAFE international equity index returned +5.26% in local currencies. However, US dollar investors did not fare quite that well, as a strengthening in the US dollar accompanied the rise in interest rates. The dollar advanced to 110.61 yen, from 106.64 at the end of February. It also advanced to $1.1743 against the euro and $1.3795 against the pound Sterling, from month-earlier levels of $1.2093 and $1.3947, respectively. With the currency movement, EAFE returned +2.30% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

The rise in interest rates was particularly pronounced at longer maturities, which, while favorable for shares of banks, caused the Bloomberg Barclays US Aggregate Bond index to fall by -1.25%. The yield on the two-year Treasury inched up to 0.16%, from 0.14% at the end of February, but the ten-year yield rose to 1.74%, from 1.44% a month earlier. [Index return: Bloomberg; Treasury yields: US Treasury]

The US stock market opened February with a sharp rebound from the slide with which it ended January, advancing toward record high levels around the middle of the month. Optimism regarding the increased deployment of COVID-19 vaccines, expectations for the large fiscal relief package as it began to work its way through Congress, and signals from the Federal Reserve regarding continued monetary accommodation all contributed to the rise. After mid-February, however, long-term interest rates jumped as some investors became increasingly concerned that the large fiscal and monetary stimulus may prove inflationary. That change, along with a renewed bout of volatility in some of the same speculative stocks that had run up in January, halted, and to an extent reversed, the market’s rise. Even so, the S&P 500 index returned +2.76% for February. Smaller stocks were quite a bit stronger still: the Midcap 400 index returned +6.80%, and the Small-cap 600 +7.65%. [Index returns: Standard and Poors]

International stocks also advanced; the MSCI EAFE international equity index returned +2.62% in local currencies for the month. The rise in US interest rates gave the dollar a bit of strength against many, although not all, other currencies. The dollar strengthened to 106.64 yen, from 104.64 at the end of January. It also strengthened to $1.2093 against the euro, from $1.2135 a month earlier, but it eased to a level of $1.3947 to the pound Sterling, compared to $1.3723 on January 31. EAFE returned +2.24% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

Because of the sharp rise in longer-term rates, bonds performed unusually poorly in February. While the yield on the two-year Treasury only edged up to 0.14%, from 0.11% at the end of January, the ten-year yield jumped to 1.46%, from 1.11% a month earlier. The Bloomberg Barclays US Aggregate Bond index returned -1.44% for the month. [Index returns: Bloomberg; bond yields: US Treasury]

In the first few days of 2021, the US stock market pulled back a bit from the strong gains it had made in the final stretch of 2020. It then seemed to find its footing. Investors shrugged off the unusual disorderliness of the transition to the new Administration, including the violent assault on the US Capitol on January 6. Market participants seemed to focus instead on prospects for additional fiscal stimulus, and indications of progress in vaccinating more of the US population against SARS-Cov-2. The markets stabilized, reaching a plateau around the time of the inauguration of the new President. In the last week of January, unusually active trading in a number of low-priced stocks, particularly GameStop (GME), introduced a surprising level of volatility into the stock market, and news reports indicated that the action required some large funds to sell some of their most liquid holdings. The stock market, and especially large-capitalization stocks, fell back in the final few days of January. Overall, the S&P 500 lost -1.01% for the month. Smaller stocks performed much better: The Mid-cap 400 index returned +1.50%, and the Small-cap 600 returned +6.29%. [Index returns: Standard and Poors]

Global markets were also reasonably steady, although a little soft. The MSCI EAFE international equity index returned -0.38% for the month. The US dollar, which had been weak in recent months, regained a bit of strength, rising to 104.64 yen at the end of January, from 103.19 at the end of December, and strengthening to $1.2135 per euro, from $1.2230. The dollar eased a bit, to $1.3723, against the pound Sterling. It had traded at $1.3662 to the pound a month earlier. EAFE returned -1.07% in US dollars. [Index returns: MSCI; currency rates: Federal Reserve H.10 release]

With increased fiscal stimulus on the horizon, longer-term interest rates rose a bit, but continued accommodation by the Federal Reserve kept short rates low. The result was a steeper yield curve. The yield on the two-year US Treasury note ended January at 0.11%, compared to 0.13% at the end of December. The ten-year yield, in contrast, rose to 1.11% at the end of the month, from 0.93% a month earlier. The increase in rates pushed bond prices lower, and the Bloomberg Barclays US Aggregate Bond index returned -0.72% for the month. [Index returns: Bloomberg; Treasury yields: US Treasury]