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Where We Were

For companies that delivered earnings misses, the punishment was severe, and for those who beat estimates, all they received was a muted cheer. Technology giants Amazon and Apple provided disappointingly little guidance while the Fed has become more hawkish about raising interest rates to combat inflation. Additionally, persistent supply chain issues and rising energy prices may make the hope of a ‘soft landing’ from the Fed more elusive.

Where We Are Going

Unless there is reason to halt rate hikes, we expect the Federal Reserve to raise rates sooner rather than later, with the most recent hike of 50 basis points coming this week to move toward the federal funds target rate for 2022. Risks to U.S. growth specifically from oil prices have moderated in recent weeks, and we still expect full-year GDP growth of around 3.5%. Vanguard expects the U.S. unemployment rate to fall to its 3.5% pre-pandemic level in the second quarter and even further by year-end.

Additional Thoughts

All 28 corrections since WWII have been more than completely erased by a subsequent bull market rally. The S&P 500 has spent almost three times as many days rallying compared to the days it has spent in correction. The average duration of corrections from peak to trough is about 4 months, and we are approaching that time frame soon. With the state of the market being rather unpredictable as of late, it is important to remember to stick to your game plan unless there is significant cause for concern. We are always here to talk if you have any questions or concerns.

 

 

Sources and data can be found at:

https://www.forbes.com/advisor/investing/stock-market-outlook-and-forecast/

https://advisors.vanguard.com/insights/article/marketperspectivesmay2022?cmpgn=FAS:EM:NWLTR:660189008347

Past performance is no guarantee of future results.