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A Rough Month For Equities

May 18, 2022

April was a rough month for equities. The S&P Total Return Index was down -8.72%, the Russell 2000 Total return Index was down -9.91%, and the Nasdaq Composite was down 13.24%. This puts the S&P Total Return down 12.92% for the year, the Russell 2000 Total Return down 16.69%, and the Nasdaq Composite down 21%.

It was the worst April in the last 21 years (2002-2022) (fig. 1), and the 7th worst month out of 244 month (Jan 2002-April 2022) (fig 2).  This was a somewhat unusual outcome because over the previous 20 years April tends to be a relatively positive month.  Looking at the previous 20 years of returns, April has only experienced negative returns in 4 of these years (2002, 2004, 2005, and 2012), and had an average return of just a bit over 2.5%.  

                          Fig. 1                             Fig. 2

Grid Source: Stadion; Data Source: Bloomberg Terminal

We believe there are many factors involved, including the war between Russia and Ukraine causing global turmoil as well as the Federal Reserve being in a tough spot between trying to support a stable economy with orderly markets and trying to combat high inflation which they once considered “transitory” but which has become “persistent”.1 These factors may not bode well for strong equity returns or a bright outlook for the near future.  We will continue to monitor these factors and the markets closely as we move forward. 

Rob Dailey
Portfolio Management Analyst

1https://www.economist.com/leaders/2022/04/23/why-the-federal-reserve-has-made-a-historic-mistake-on-inflation Published April 23, 2022; Accessed May 16, 2022.

The S&P 500 Total Return Index is an unmanaged index of 500 common stocks chosen for market size, liquidity and industry group representation. It is a market-value weighted index. As a total return index it assumes reinvestment of all cash distributions.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market and it is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies.

The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical measurements are one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity.

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