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!
US Large cap stocks hit a sharp skid last week, shedding -2.7% to end up right at -10% for the year. The short-term sell-off seems to be a reaction to how the Fed’s policy actions seem to be shaping up, which is quicker interest rate rises. A path even the Fed admits is more aggressive than what they originally planned.
- Not helping the news last week was Netflix reporting that they lost subscribers in the first Quarter and anticipate losing more. The stock shed 35% in a single day and illustrates why diversification is a must in every portfolio. It also stands as a cautionary tale that even the biggest and most widely owned darling stocks are not immune from economic forces which we cannot see. Something FB/Meta also showed us over the last 6 months.
And while last week was volatile, The US market is now at a level it was actually at just 4 weeks ago. In Mid-March, the S&P 500 index was at the -10% level before recovering most of that in the second half of the month. So now that we’re in earnings season in the first part of Q2, a string of good news from S&P 500 companies could rally the market up again. Negative news from any key names could add to more volatility, as we saw with NFLX. So, most eyes will be on the earnings reports for the next few weeks.
Lastly, one area of remarkable resiliency that we would like to point out is international stocks. While the overall index return is not any better than the US so far this year, it certainly could be a lot worse, but it isn’t. This is an asset class that is dealing with many of the same problems as the US, such as high inflation and subsequent rising interest rates, but also some obvious additional issues. Foremost is Europe, which is home to several of the Top 10 economies in the world. Europe is dealing with the major threats brought on by the Ukraine war, and significantly greater energy inflation as a fallout of that war. Throughout Asia, spikes in Covid cases are trending again which once again disrupts the story of economic recovery. Additionally, one result of Russia attacking Ukraine 8 weeks ago was a spike in the value of the US $, which is a headwind on paper for International stocks.
- All the while dealing with this confluence of issues, I would have expected international stock indexes to be extremely volatile. But so far, they have not been; they have moved in line with the US markets, even weathering pockets of volatility better than US indexes. Last week, for example, the MSCI EAFE index was +1.1 better than the S&P 500 index. So, we are very pleased to see the resiliency in international equities and we’re excited for the opportunities there once conditions start to change.