Equity markets, both in the United States and around the world, started 2022 with a thump. In the U.S., the S&P 500 Index fell 5.17%, the Dow Jones Industrial Average fell 3.24%, and S&P International 700 Index fell 3.58%. At its nadir on January 24th, the S&P 500 was down 11.3% putting it in correction territory (a drop of 10% or more from a recent high), although it never closed down more than 9.23%. Strong markets on the month’s last two days substantially mitigated the month’s loss. Smaller stocks fared worse than larger stocks, with the S&P MidCap 400 and Small Cap 600 down 7.21% and 7.27% respectively.
If you think emotions rule markets – fear overcame greed in January. If you believe in more rational explanations – after two strong years markets were at lofty valuations at year-end 2021 and we were faced with the near certainty of rising interest rates along with a level of inflation not seen in years as well as significant global turmoil involving Russia-Ukraine and China- Taiwan. So, people voted with their feet and sold equities knowing that they will not have to pay taxes on the gains until April 2023.
The question to consider now is what happens next? Will we see a recovery, or a continued decline?
Our January 2022 market commentary provided by Peter W. Tuz, CFA, CFP® President & Portfolio Manager, Chase Investment Counsel.