Take a look at last week’s market recap from Joe Gallemore, CIMA® Partner & Director of Investment Management for Argent Bridge Advisors. Watch the video now!
Stock indexes had a strong bounce-back week March 14-18. It was the best week for the US market since Nov 2020.
- The S&P 500 recovered 6.2%, US Small caps were up 5.4%, and the MSCI EAFE index (proxy for International stocks) gained 5.6%.
- It’s unclear exactly what sparked the rally, but gains were seen across pretty much all stock asset classes. Hopefully, this is an indicator that there is investor optimism beneath the surface that is being stymied by the heightened uncertainty resulting from the war in Ukraine.
Bonds trended downward still as the Fed followed through on its widely broadcasted intention to raise interest rates last week. Although the Fed board would like to remain accommodative during this period of economic disruption caused by the war in Ukraine, they made it clear that they simply couldn’t not act to curb very high inflation.
Now some of you may think that rising interest rates are bad for the stock market, but this isn’t necessarily true.
- Some sectors benefit from rising rates, such as Financials, Industrials, and materials.
- My colleague, Eric, shared a stat published by LPL Research & Bloomberg, that since 1983, 12 months after the initial rate hike in a rising-rate cycle, the stock market was positive 100% of the time. Of course, that being true in the past does not guarantee it happens now, but we like those odds.
- But remember the main goal of the Fed in raising interest rates is to cool off inflation which is something we all want. Slowing down the rising cost of goods in our economy is naturally good for the end consumer. Slowing inflation allows the average household to maintain the ability to continue spending rather than having to cut back expenses altogether. And the consumer is the primary engine of the US economy.
One important distinction to make is that food and gas are in a class by themselves. Those are staples items that all of us must obviously spend money on. Hopefully, a peace agreement in Ukraine is reached sooner rather than later, and when it is, the likelihood is good that we’ll see an immediate decline in gas and food costs.