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April, 2022

Market Summary

The first quarter of 2022 was one of those unfortunate time periods where stocks and bonds fell together. The S&P lost 5%, the Nasdaq was down 9%, and the Aggregate Bond Market was negative 6%. International stocks and bonds did not fare any better as a war in Ukraine added to security and economic concerns. Energy stocks and gold were two bright spots amid inflation worries. Real estate also held strong, although the 30-year mortgage has increased by a full percent this year. This may eventually slow the nationwide buying frenzy for residential properties. In general, portfolio allocations are currently light on stock and bond expos

The Federal Reserve has made the shift from an accommodating monetary policy to a tightening monetary policy in 2022. This means higher interest rates, as the consensus is now for six or seven rate hikes of .25% each in 2022. Fixed income has been selling off in response to this policy shift. Just three months ago, the expectation was for two or three rate hikes this year, however persistent inflation is forcing the Federal Reserve’s hand. The bond markets already appear to have priced in all anticipated rate hikes for 2022. This may indicate that bonds are oversold or have dropped too far, too fast, particularly if all the rate hikes are not realized. The treasury yield curve has inverted. Two-year rates are now higher than five-year rates. Historically, this has been a signal for economic distress and often precedes a recession. Slowing the economy may be the Federal Reserve’s only method to get a handle on rising prices. In general, portfolio allocations are currently light on both stock and bond exposures and heavy in cash. This is intended to be short-term until funds can be deployed at better valuations for stocks and higher yields for bonds.

There were no material changes made to our ADV disclosure document last year. Per SEC regulations, I must offer our ADV Disclosure Documents on an annual basis. It is available on our website at www.sierrafinancialadvisory.com under the disclosure dropdown menu or you can call our office and we will send you a copy. 

We welcome your call if you would like to discuss your portfolio, financial plan, or the markets, in general. Thank you for your business.

 

Sincerely,

Joe Tomkiewicz MS, CFPr

Michael Tomkiewicz MA


 

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