While this is a cover letter to a monthly report, the month did end the first quarter and it was a quarter that bears mention. It was one for the record books. War. Inflation. The First U.S. Fed funds rate increase. The likely (typing with fingers crossed now) final act to U.S. Covid. Inverting yield curves. Seven million JOLTS (Job Openings and Labor Turnover Survey) – What? Much of China in lockdown with its Covid battle.
March started off where January and February left off – down sharply. At its worst (so far), since the start of the year, the S&P 500 Index got down to -13% on 3/8/22. At their worst, the NASDAQ and Russell 2000 got down to -20% (3/14) and -14% (3/14), respectively. And yet, without warning, without a hint of progress for Ukraine, with Doves dying and Hawks flying on the Federal Open Market Committee, the equity market turned around, as if to say Enough, and rallied. Knowing the at-their-worst numbers above – look at the year to date column on the table below and you get a sense from that and from the S&P Chart next to it, how March finished. Strong. Is this a typically violent rally in a bear market? It could be, and as one of the great Doubting Thomases of the modern era – I instinctively lean that way. However, my emotional instincts have never served me well as an investor. The bloodless verdict of the market, for now, is let the rally play out. It will either broaden and give longer term signals of continued strength, or it won’t and we’ll likely have to move more defensive where we can on our allocations. Whether that comes to pass this month, in the summer or year end, or if at all – we’ll ignore the stomach acid along the way and just let the market tell us. It’s done well so far with its messaging, even if we don’t necessarily understand exactly why. It sees the future better than any one individual.
Be well,
Mike
Sources: Addepar, Bloomberg
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