Monthly Market Insights
Monthly Market Insight
Greater clarity on monetary policy and improved investor sentiment on the economic outlook propelled stocks in March to their first monthly gain of the year. The Standard & Poor’s 500 Index led, gaining 3.58 percent. The Dow Jones Industrial Average added 2.32 percent, and the Nasdaq Composite picked up 3.41 percent.1
If a window of opportunity appears, don’t pull down the shade.
Tom Peters, writer, best known for the business bestseller In Search of Excellence
ROUGH START, STRONG REBOUND
The month started out with the same anxieties that dragged the stock market lower in January and February: rising bond yields, slowing economic growth, elevated inflation, and Ukraine. The escalation of hostilities in Ukraine, along with a continuing stream of Western economic sanctions, heightened concerns over the war’s impact on inflationary pressures and the global economy, sending stocks lower in the early part of March.
FED RAISES RATES
A combination of strong economic data and the announcement by the Fed that it was raising rates by a quarter of a percentage point set the stage for a strong rebound in the second half of the month.
While stocks wobbled immediately following the Federal Open Market Committee’s news, investors subsequently reinterpreted the Fed’s aggressive steps as a serious commitment to taming inflation and a reassuring statement about the current health of the economy to withstand higher interest rates.2
YIELD CURVE CONCERN
Investors’ attention turned to the bond market as the month progressed. In early March, the spread between the 2-year and 10-year Treasury yields was 85 basis points. By March 30, that spread had narrowed, and some parts of the bond yield curve had inverted.3,4
Some view a yield curve inversion as a signal that the economy may be headed toward a recession. While yield curve inversions are not flawless predictors of future economic activity, its action was a concern and is likely to remain so in the months ahead.
Every industry sector enjoyed a month of positive performance, with gains in Communications Services (+2.43 percent), Consumer Discretionary (+6.31 percent), Consumer Staples (+1.56 percent), Energy (+9.79 percent), Financials (+1.82 percent), Health Care (+6.45 percent), Industrials (+4.71 percent), Materials (+7.15 percent), Real Estate (+8.41 percent), Technology (+4.71 percent), and Utilities (+9.73 percent).5