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Q1 2022

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Key Takeaways, First Quarter 2022

By Ralph Goldsticker, CFA | Apr 2022

Both stocks and bonds fell during the quarter. The capital markets were increasingly focused on the risks of inflation and rising interest rates triggering a recession. Economic sanctions imposed after Russia’s invasion of Ukraine raised energy prices and added more uncertainty. After falling more than 13%, both US and international stock markets recovered, falling only 5% for the full quarter suggesting that investors believe that the risks will be contained.  

As expected, the Fed increased interest rates in their March meeting, the first time since December 2018. Interest rates on longer-maturity Treasury and TIPS break-even inflation rates rose. 


Both US and international stocks fell.

  • The broad US market fell 5.3%, developed international fell 5.4%, and emerging markets fell 7.0%.

  • There was large divergence across sectors. Driven by the spike in oil prices, the energy sector gained 39%.

  • After leading the market for several years, the higher growth sectors fell significantly: Tech -9.1%, Communication Services -12.1% and Consumer Discretionary -10.2%.

  • US growth stocks underperformed the broader market, losing 9%. Because of their higher proportion of growth stocks, small caps lost 7.5% versus 4.6% for large caps.

Fixed Income

Interest rates rose, and prices of bonds of all types fell. 

  • The yield on 10-year Treasury bonds finished the quarter at 2.34%, crossing above 2% for the first time since the middle of 2019. 

  • The aggregate US bond market fell 5.9%.

  • Investment Grade (IG) bond spreads widened by 21 bps and High Yield by 42 bps. IG spreads are now 18 bps wider than their December 2019 level, while High Yield 11 bps narrower.

  • While narrowing, real interest rates are still negative -0.92% for 5-year TIPS, and -0.52% for 10-year TIPS.

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