Take a look at the March market recap from Joe Gallemore, CIMA® Partner & Director of Investment Management for Argent Bridge Advisors. Watch the video now!
During our last Cup of Joe we cautioned about not getting too excited about the strong returns in January. February was a perfect example of why we are careful not to get ahead of ourselves.
During February, pretty much all asset indexes trended down in about -1.5% to -2.5% range.
- Lots of data came in that put a damper on overly-optimistic views of the economy.
- Fed minutes showed steadfastness, inflation didn’t come down as much as investors expected or hoped, rumors of trade tensions between the US and China started to escalate, and a consistent theme on corporate earnings calls, especially from retailers, was that they are cautious on the next few quarters, not excited.
Returns are still in positive territory on the year which is good to see.
February was also an excellent illustration of how the stock market is not the economy.
- If you annualized the return of the S&P 500 from January (+6%) it would be +72%.
- Obviously no one expects that, but with the back drop of any economy that is showing no clear evidence of being on the upswing, that pace of performance seems even more farfetched.
- Old investing adage comes to mind, a lot of the time the markets acts as a voting machine instead of a weighing machine.
Where are we Now?
- We’re kind of where we thought we would be… but not how we thought we’d get here.Our end of 2022 segment advised to expect more volatility this year.
- The market is still modestly positive YTD and volatility is more subdued, but still present.
- It is very much a data-driven rat race as market participants look to every econ report and inflation print hoping to find the bottom and signal the turnaround.
In this environment we’re being patient and pragmatic with portfolio actions. Cash is our friend, because we’re being paid to wait, but also allows us to invest into volatility through dollar-cost averaging to improve long-term outcomes. Bonds are providing meaningful income one again. And as Fed rate increases near their ultimate level, the interest rate risk diminishes, and bonds also provide the ballast to stock volatility that they historically have.