Welcome to March! After a rocky start to the year, it looks like this month may continue the bumpy road we’ve been on as markets digest the Russia-Ukraine conflict, the expected interest rate hike, and the possibility of more inflation.
Russia invaded Ukraine. Russia invaded neighboring Ukraine in late February. The attack sparked a global outpouring of support for the Ukrainian people and harsh economic sanctions on Russia. What’s next is hard to say, given how fluid the situation is on the ground. As Russia finds itself more isolated – geopolitically and economically – we’ll see what impact that has on global markets.
All eyes on the Fed. The Federal Reserve is expected to increase interest rates later this month. Higher interest rates impact all corners of the economy, from mortgages to credit cards to business loans, and they can also be one of the ways to potentially reduce inflation. The anticipated increase in interest rates means some investors are hedging, moving away from growth-oriented investments in favor of more stable, cash-flowing one, which tend to be less sensitive to changes in interest rates. The continuation of this trend may contribute to elevated volatility in the coming month, but remember: market fluctuations are expected, and historically, markets always recover.
What’s next for inflation? The leading contributors to inflation are food- and energy-related costs, including gas, used cars and trucks, and food staples. February’s year-over-year Consumer Price Index (CPI), the most-often cited measure of inflation, came in at 7.9%, an increase of .40%. There are some concerns that economic sanctions levied against Russia – including the banning of all oil imports – will contribute to immediate-term inflationary pressures at home. We’ll be closely watching CPI over the next few months to see what impact sanctions and likely higher interest rates may have on inflation’s momentum.
On a less serious note:
End of an era. Legendary Duke basketball coach Mike Krzyzewski – aka “Coach K” – is retiring at the end of this season. In his 42-year career at Duke, he led the Blue Devils to five national titles, 12 Final Four appearances, 15 Atlantic Coast Conference tournament championships, and 13 ACC regular season titles. Coach K also served as head coach for the US Men’s Olympic team, leading them to three gold medals. He steps away from the game as the winningest coach in NCAA men’s basketball history, with more than 1,100 games won. Every great performer needs a great coach, and Coach K’s retirement marks the end of one of the most remarkable careers in sports, let alone men’s college basketball.
We’re grateful to be part of your financial coaching team. If there’s anything you need, please schedule some time with our office.
February saw more red than green again as stocks were whipsawed by the Russian invasion of Ukraine and the anticipated interest rate hike in March.
Energy continues to outpace all other sectors, adding another 7.13% in February to finish up 27.59% year-to-date. However, with sanctions set to fall into place, it bears watching to see if Energy stocks can continue to outperform the broader market.
The Energy sector contains stocks like Chevron, Exxon Mobil, and ConocoPhillips.
US government bonds offered some safe haven from the rockier equities markets, ending February essentially flat. The anticipated interest rate hike sometime in March has likely contributed to negative performance year-to-date.
Economic fundamentals remain strong. In spite of volatility, the economy is exhibiting several positive indicators:
Inflation and supply chain concerns have overshadowed what has otherwise been a robust turnaround by the US economy in terms of GDP. GDP stands for gross domestic product and it’s a reliable measure for the productivity of a given country.
Cats and Dogs May Protect Owners From Memory Loss in Later Life, Study Finds
Owning a pet, like a dog or cat, especially for five years or longer, may be linked to slower cognitive decline in older adults, according to a preliminary study.
“Prior studies have suggested that the human-animal bond may have health benefits like decreasing blood pressure and stress,” said study author Tiffany Braley of the University of Michigan Medical Center in Ann Arbor.
“Our results suggest pet ownership may also be protective against cognitive decline.”
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THOUGHT FOR THE MONTH
Dow Jones Industrial Average: The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.
Dow Jones U.S. Real Estate Total Return Index: The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.
NASDAQ Composite: The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.
S&P 500 Bond Index: The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.
S&P 500 Consumer Discretionary: The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.
S&P 500 Consumer Staples: The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.
S&P 500 Energy: The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.
S&P 500 Financials: The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.
S&P 500 Index: The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.
S&P 500 Utilities: The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.
S&P U.S. Aggregate Bond Index: The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.
S&P U.S. Treasury Bond Index: The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.
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