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March Market Review Thumbnail

March Market Review

March was a volatile month for the S&P 500, with a variety of major events influencing market performance.  At its worst, the S&P 500 was down nearly 5.0% in early March before recovering over the last three weeks to produce a full-month gain of 3.7%.

Significant events and headlines were plentiful during the month and all had implications for the stock market.  Listed below are some of the most impactful drivers of market performance in March:

  • Commodities – WTI Crude oil is arguably the world’s most important commodity, and with the Ukraine-Russia war limiting supply, prices climbed 6% last month and more than 80% over the past year.  Energy and Materials (+9.0% and +6.1% in March, respectively) continue to benefit from high commodity prices and outperform the market, while Consumer Staples, where commodity prices are a large input cost, continue to lag.  

  • Interest Rates – With the Federal Reserve’s decision to raise interest rates by 0.25%, and indications of additional increases throughout the year, yields have soared.  The 10-year US Treasury Yield climbed to 2.5% toward the end of the month, pushing 30-year mortgages close to 5%.  Given this movement, it is not surprising that homebuilders and home improvement stores underperformed during March.
  • China COVID-Lockdowns – Chinese authorities announced that various cities would impose lockdowns on residents for specified periods of time due to an uptick in COVID-19 cases.  These lockdowns will further disrupt already strained consumer and industrial supply chains, and are a reminder that COVID-19 can still be a major challenge for economic growth in other regions of the world

  • Momentum Stock Rally – Despite negative headlines about Chinese lockdowns and rising interest rates, high-valuation momentum stocks like Tesla and Nvidia saw gains averaging nearly +36% over the last two-and-a-half weeks of the month.  As a result, Technology-focused sectors of the market outperformed during March.

With so many cross-currents influencing global stock markets and economies, holding a diversified, high-quality portfolio continues to be paramount.  Investors looking to hide in “safer” areas of the market experienced mixed results in March, as Utilities gained 10.4% but Consumer Staples underperformed the market by almost 2%.  Additionally, rising interest rates are typically positive for banks and negative for higher-valuation Technology-focused stocks.  However, the opposite was the case in March, as Financials underperformed all other sectors and Technology gained 12.7% from its intramonth low.

As we move into the second quarter of the year, stock market risk remains elevated.  We will continue to invest in high-quality companies that have a history of strong long-term results in a variety of economic conditions.

We are also currently reviewing the fixed income allocations of our portfolios and anticipate making changes to the funds we are utilizing in many portfolios. As the interest rate environment is changing, we want to make sure that this portion of the portfolio is best positioned to provide as much stability as possible in a volatile stock market environment while also capturing increased yield in the bond market as interest rates rise.

As always, we welcome your questions and comments.