Sometimes a quarter passes and nothing much happens. Other times, so much happens in a quarter that it seems like a full year. The first quarter of 2022 falls into the latter category. Supply bottlenecks and then, of course, the inflationary implications of the war in Ukraine brought large price changes to bonds (negative) and commodities (positive).

The U.S. stock market shrugged off several attempts at a broad sell-off last quarter, eventually ending up about 11% higher. Both November and December saw drawdowns of more than 3% before sharp reversals led to new all-time highs. Of course, this stellar performance is only accurate if we consider the largest handful of U.S. companies as “the stock market”.

While it is technically true that the S&P 500 stock index added 0.58%i in the third quarter, it really didn’t feel that way. Small cap U.S. stocks declined, midcap U.S. stocks declined, and foreign stocks declined (both developed and emerging markets).

Stocks maintained their strong advance in 2021 by adding another 8.55%1 last quarter. Technology, Energy, and Real Estate led the way.

Similar to the first quarter of 2020, the first quarter of 2021 was defined by COVID-19. But instead of lockdowns and an exponential spread of the virus, the quarter ended with a record vaccine rollout.

The stock market’s recovery from the COVID-influenced market sell-off in March accelerated last quarter as multiple pharmaceutical companies announced successful vaccine trials

The U.S. stock market gained 8.9%1 last quarter as investors gained confidence that the worst of the COVID 19 crisis was behind us. Still, it has been a umultuous year and the risks are not all behind us.

Stock prices rebounded sharply last quarter as investors began to anticipate the eventual economic recovery.  Whether the recovery actually comes to pass as soon as the market is hoping is another thing entirely, but it is important to remember that the stock market is a discounting mechanism.  In other words, it represents the collective expectation of participants. 

It probably comes as a surprise to no one, but the first quarter of 2020 was the worst first quarter in modern market history. The stock market lost 19.6% during the quarter, but even that fact masks the truly awful stretch between February 20th and March 23rd in which the S&P gave up more than a third of its value.

2019 closed on a high note for stocks as interest rate cuts fueled a speculative boom which has continued into 2020. Against a backdrop of accommodative central banks all over the globe and a somewhat more cordial relationship between the world’s two foremost economic powers, investors everywhere became more aggressive. With dividends reinvested, the S&P 500 soared 31.49% on the year.