Markets “In a Nutshell” for April 18, 2022
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 0.80%, the S&P 500 was down 2.10%, and the NASDAQ fell 2.60%. Foreign stocks (MSCI EAFE) were also down, rising 1.20%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 2.83%. (Data source: Wall Street Journal)
The new inflation data came out last week for the month of March and once again we saw a 40-year record high in CPI (consumer price index). CPI rose by 8.5% year over year as we still wait for these inflation numbers to peak. With this CPI number having higher energy costs baked in some believe this may be peak inflation as energy prices have cooled off a bit. Another inflation reading which is PPI (producer price index) came in at 11.2% year over year. This measures the prices paid by domestic producers. Some worry inflation will continue to rise as these increases in costs from producers typically get paid by the consumer later on. The next couple of months should give a good outlook on if inflation has peaked or if we will continue to see these record highs in price increases.
The bond market has had a rough start to the year as yields have been on the rise rapidly. The two-year treasury has moved from 0.73% to a high of 2.52% just this year. This has put pressure on the bond market as the yield has more than tripled. While there is a good chance yields continue to rise, it is very unlikely that they continue to rise at the rate we have seen. As yields begin to move slower bonds will not be hit as hard and this possibly provides an opportunity to invest in bonds at these new, higher rates compared to the near 0 rates we saw during the pandemic. The bond market will also be paying close attention to the next Fed rate hike which is expected to be a 0.50% rate hike which will be different from the typical 0.25% rate hikes we have seen in recent history. Although this will not be released for a couple of weeks, there will be much anticipation regarding this decision.
What is the average return on the S&P 500 since 2009? (Scroll Down for Answer)
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2. 14%. Although equities have been lower to start this year, it is good to remember that stocks have performed well in the long run and this is just a bump in the road for long term investors.