March 2022 in Review
Welcome to the monthly market update from Midland Wealth Management. I am Betsy Pierson, Chief Investment Officer with Midland. I wanted to take a few minutes to give you an update on the market action in March and any future thoughts we may have.
March certainly came in like a lion with equity markets declining the first eight days of the month. This was in response to the Ukrainian war with Russia, the sanctions on Russia, and the pressure it put on oil prices. Oil prices, as measured by the WTI Crude, hit an intraday peak on March 7th at $126 per barrel. During the month it did decline as low as $92 per barrel on news that China was going to be shutting down parts of its country due to the Covid variant, but by the end of the month, oil was back to around $100 per barrel. The fear of inflation and Fed action drove the equity market, especially the international and emerging markets, lower. The closure of the Russian investment exchanges led to significant declines in Russian bond and stock prices, with the majority of Russian stocks that are being held in mutual funds and ETFs being marked to zero as there was no ability to trade them. As oil prices fell and stabilized, equity markets rebounded and the domestic stock markets ended on a positive note for the month of March. The S&P 500 increased 3.71% while the mid-cap and small-cap markets provided returns around 1.3%. The developed international market recovered from its lows earlier in the month but basically had a flat return, while emerging markets made a great recovery but still was down 2.26% during the month. All markets continue to have negative returns for the year to date through March 31st.
Interest rates continue to increase in the 2 to 30-Year part of the yield curve with the 2-Year increasing almost 1% while the 10-Year Treasury increased about a half percent. As bond prices go down as yields go up, leading to negative returns. So with this market action, there were negative returns in the intermediate and long-term parts of the market. The major bond index, as measured by the Bloomberg Aggregate, was down 2.78% during the month and has declined almost 6% for the year. It has been a painful time to be a bond investor but unless the Fed needs to be more aggressive than what is built in the market, the worst of the bond market sell-off may be behind us.
During the month, the Federal Reserve made their first move to increase short-term rates by raising overnight rate for banks to a quarter percent or 25 basis points. It is anticipated that they will become more aggressive in May with a half-point or 50 basis point increase. The bond market in the 2-Year and longer maturities, as I said before, have anticipated this and is one of the main reasons for the extremely negative returns this year so far in the bond market.
Volatility in the market has certainly increased this year and we believe that this will continue with much uncertainty surrounding Ukraine, inflation, and let us not forget we have mid-term elections coming up in November which tend to cause some disruption. We continue to be long-term investors in this market and investors should continue to stick to an appropriate diversified long-term investment strategy. Markets move up and down on a day-to-day basis and taking a long-term approach has led to great success.
If you have any questions or want to speak to one of our portfolio managers, please do not hesitate to reach out to us. Thank you and have a great day.