Please find our most recent market review below. We hope these perspectives are valuable to you.
– The AdvicePeriod Team
Monthly Market Review
By Nathan Sonnenberg
AdvicePeriod Chief Investment Officer
August proved to be a tough month for both stocks and bonds as inflation and interest rate increases weighed on markets around the globe.
The S&P 500 declined by 4.0%, while the Dow Jones Industrial Average lost 3.2% and the technology-oriented Nasdaq 100 Index retreated 5.1%. Global equities, as measured by the MSCI ACWI Index, lost 3.6%. U.S. bonds, meanwhile, declined in price, driving up yields. The Bloomberg Barclays U.S. Aggregate Bond Index fell 2.8% for the month. Municipal bonds fared almost as badly, with the S&P National AMT-Free Muni Index falling 2.4%.
Markets got off to a strong start in August following a solid July, but that momentum gave way following a speech by Federal Reserve Chairman Jerome Powell. Signaling that the bank’s planned interest rate increases are likely to bring pain to households and businesses, Powell effectively upended hopes for an economic soft landing.
There was plenty of good news in August; perhaps the best was that the economy, which created 528,000 jobs in July, added another 315,000. Markets, however, fell on fears that rising employment will fuel inflation, making additional interest rate increases more likely.
Inflation, as measured by the Consumer Price Index, was 8.5% for the 12-month period ended in July. Yet there are growing signs that inflationary pressures are subsiding. Both food prices and the prices companies pay have now declined for five straight months. Oil prices have returned to February levels, and supply-chain bottlenecks have eased. Real gross domestic product declined at an annual rate of 1.6% in the first quarter and 0.6% in the second quarter. But the Atlanta Fed currently projects positive third-quarter growth of 1.4%.
On a more downbeat note, rising interest rates have made it harder to buy a home: The average 30-year fixed mortgage rate rose in August to 5.6%, up from 3.1% at the end of 2021. In
August, the benchmark 10-year Treasury yield climbed to 3.1%, and the 30-year Treasury yield touched 3.3%. Those yields were 1.5% and 1.9%, respectively, at the end of 2021.
Looking ahead, the Fed is expected to announce an interest-rate hike of as much as .75% at its Sept. 21 meeting. It’s already raised rates by 2.25% this year. The central bank also plans, starting in September, to sell $60 billion of Treasuries and $35 billion of mortgage-backed securities each month as part of its inflation fight.
As we head into autumn, the market will be looking for clues about inflation’s “stickiness”: If it fails to fall swiftly, the Fed may need to stay hawkish for longer, with potentially painful consequences for the economy. The next inflation update is scheduled for Sept. 13.
With the inflation saga playing out, it appears likely that markets will remain volatile for some time. Over the long term, however, we believe they will deliver wealth to investors who remain patient and disciplined. Don’t hesitate to contact your wealth advisor with any questions about your investments or your financial plan.
The S&P 500 Index is a market-value weighted index provided by Standard & Poor’s and is comprised of 500 companies chosen for market size and industry group representation.
The Dow Jones Industrial Average (DJIA) is an index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ.
The Nasdaq 100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.
The MSCI All Country World Index (ACWI) is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed and emerging market countries.
The Bloomberg U.S. Aggregate Index represents the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, as well as mortgage and asset-backed securities.
The S&P National AMT-Free Municipal Bond Index is a broad, comprehensive, market value-weighted index designed to measure the performance of the investment-grade tax-exempt U.S. municipal bond market.
The indices referenced are unmanaged and cannot be directly invested into. Past performance is no indication of future results. Investing involves risk and the potential to lose principal.
This commentary represents an assessment of the market environment through August 2022. The views and opinions expressed may change based on market or other conditions. The forward-looking statements are based on certain assumptions, but there can be no assurance that forward-looking statements will materialize.
The commentary is meant for informational and educational purposes only and does not consider any individual personal considerations. As such, the information contained herein is not intended to be personal investment advice or recommendation. Please consult a financial professional before making any financial-related decisions.
AdvicePeriod is another business name and brand utilized by both Mariner, LLC and Mariner Platform Solutions, LLC, each of which is an SEC registered investment adviser. Registration of an investment adviser does not imply a certain level of skill or training. Each firm is in compliance with the current notice filing requirements imposed upon SEC registered investment advisers by those states in which each firm maintains clients. Each firm may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by an advisor with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For additional information about Mariner, LLC or Mariner Platform Solutions, LLC, including fees and services, please contact us utilizing the contact information provided herein or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you invest or send money.
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Major Market Index Returns
Period Ending 9/1/2022
Multi-year returns are annualized.
Mix Index Returns
Global Equity / US Taxable Bonds
Indexes are unmanaged and cannot be directly invested into. Past performance is no indication of future results. Investing involves risk and the potential to lose principal.
The Russell 3000 Index is a United States market index that tracks the 3000 largest companies. MSCI Emerging Markets Index is a broad market cap-weighted Index showing the performance of equities across 23 emerging market countries defined as emerging markets by MSCI. MSCI ACWI ex-U.S. Index is a free-float adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets excluding companies based in the United States. Bloomberg U.S. Aggregate Bond Index represents the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, as well as mortgage and asset-backed securities. Bloomberg Municipal Index is the US Municipal Index that covers the US dollar-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds.
What You Pay For: The Percentage of Active Managers That Underperform Their Benchmarks
Trailing 10 Years Numbers As of December 31st, 2021 – S&P Spiva Scorecard
Percentage of US large-cap funds that underperformed their benchmarks
US large-cap benchmark:
Percentage of international funds that underperformed their benchmarks
S&P International 700
Percentage of emerging market funds that underperformed their benchmarks
Emerging Markets benchmark:
The SPIVA Scorecard is a robust, widely-referenced research piece conducted and published by S&P DJI that compares actively managed funds against their appropriate benchmarks on a semiannual basis.