With the Kansas Jayhawks beating the North Carolina Tar Heels in the NCAA basketball championships, March Madness is officially over. And for the markets, March was truly a month of madness as stocks and bonds declined significantly before a modest rebound.
Overall, the first quarter of 2022 saw new highs for stocks early in the quarter followed by fresh lows later in the quarter. At the buzzer, the S&P 500 finished down 4.6%, MSCI EAFE (international stocks) fell 5.8% while MSCI Emerging Markets stocks fell 6.9%. And the Bloomberg Aggregate Bond index was down 5.9%.
The numerous cross currents affecting the markets included: accelerating inflation (gasoline prices!), interest rates, the Federal Reserve Bank, supply chain issues and the war in Ukraine. These cross currents seem to be linked and can also stand alone as reasons for worry.
With The Masters Tournament and spring around the corner, we are also looking to the positives in the markets. The US Consumer is still leading the economy, equity valuations are improving, corporate balance sheets are strong, Covid appears to be fading and we have some visibility into the Federal Reserve Bank’s plan for its balance sheet and interest rates. For these reasons and more, we prefer to own stocks over bonds, while leaving some reserves for unexpected downturns.
Please click on the link below for more detail in our quarterly letter.