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.
Bull|Bear Insights
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You may have noticed that the market cycle has changed along with the Fed’s monetary policy shift to fight inflation. In a bull market, it pays to focus on capturing return. Bull markets are typically built and become wholly dependent on the Fed maintaining an accommodative monetary policy. Growth, momentum, and tech stocks typically do very well during bull markets.
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Bull|Bear InsightsCy Intelligence
Cy Wins Second Consecutive FinTech Breakthrough Award For Best Robo Advisory Platform
Prestigious International Awards Program Recognizes Outstanding Financial Technology Products and Companies RED BANK, N.J., March 17, 2022 – Cy, a revolutionary financial advisor-assisted robo advisory…
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The good news is fourth-quarter GDP set a blistering pace of 6.9% lifting 2021’s full-year growth to 5.7%. The bad news is the economy is running hot and exceeding growth expectations. Now the Fed has a clear path to boldly raise interest rates to fight inflation. Fed Chair Powell has indicated a drop in markets won’t cause him to reverse course this time, believing this strong trending economy can withstand a rate hike cycle without falling into a recession. The Goldilocks scenario is called a soft landing.
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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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