You may have noticed that the market cycle has changed along with the Fed’s monetary policy shift to fight inflation. With inflation soaring, it is clear that the Fed is way behind the curve on raising interest rates. They will likely stomp on the proverbial breaks in an attempt to rapidly slow the overheated economy and inflation. When the Fed moves into this type of posture, they have caused a recession about three-quarters of the time. And recessions are typically correlated with bear markets.
Steve Van Solkema, CFA
Steve Van Solkema, CFA
Mr. Steven Van Solkema is President, Chief Investment Officer, and Co-Portfolio Manager of WBI Investments, Inc. He has over twenty years of portfolio management, trading, quantitative modeling, risk management, operations, and compliance experience in equity and fixed income capital markets. Mr. Van Solkema also serves as Chief Quant Officer for CyborgTech and was integral in creating the advanced mathematic algorithms and quantitative analysis foundation of Cy’s revolutionary advisor-assisted robo platform.
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After briefly touching record highs at the start of the year, markets gave investors a truly wild ride through the first quarter of 2022. Most indices chalked up their first quarterly loss in two years. Any positive sentiment that was carried into the new year got decimated by more sky-high inflation readings, clear indications that monetary policy must tighten faster than expected, and lingering concerns over additional COVID-19 variant surges. As if that wasn’t enough, Russia’s invasion of Ukraine brought a further surge in commodity prices along with huge spikes in market volatility as news and pictures of the horrors of a brutal war sent shockwaves around the globe.
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Following increased volatility in the third quarter, the last quarter of 2021 brought an unnerving amount of optimism in the markets especially considering sky-high inflation readings, a hawkish Fed announcing moves to eliminate easy monetary policy from the past 10+ years, and concerns over the Omicron COVID-19 variant surge. Virtually all sectors ended the year strong during the fourth quarter of 2021 and benefitted from a December “Santa Claus rally” once again. The S&P 500 Index rose 10.65% during the fourth quarter to end the year up 26.89%. The tech-heavy NASDAQ closed out the year with an 8.28% gain for the quarter, almost all of which occurred in the month of October. In contrast to other indices, the NASDAQ squeezed out a mere 0.69% return in December. Furthermore, as we write this commentary, it is clear that was just the beginning of relative underperformance in the technology sector that would continue into the early weeks of 2022. The Dow Jones Industrial Average ended the fourth quarter up 7.37% and 18.73% for the entire year.
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Bull|Bear InsightsQuarterly CommentaryQuarterly CommentaryWBI Insights
Volatility returns in Q3 as eyes remain on the Fed
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Bull|Bear InsightsQuarterly CommentaryQuarterly CommentaryWBI Insights
Is there still value in value?
Markets in Review Equity markets continued their upward climb during the second quarter of this year. Following a solid first quarter, the S&P 500 Index…
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