The first quarter saw a significant increase in market volatility. Russia’s invasion of Ukraine, piping hot inflation, and rapidly rising interest rates all came together to push markets lower across the board. Global economic sanctions levied against Russia led to steep declines in the ruble as Russia’s capital markets ceased operating; oil and other commodities prices soared, fueling already high global inflation. Here at home, February’s monthly Headline CPI reading of 7.9% in year-over-year inflation led the Federal Reserve to sharpen its hawkish, anti-inflation stance and raise interest rates 0.25% at its March meeting. The 10-year U.S. Treasury, which began the year at 1.52%, rose sharply to finish the quarter at 2.32%.
Subsequently, most major asset classes posted negative returns for the quarter. The MSCI All-Country World Index returned -5.26%; U.S. stocks posted virtually the same return at -5.28%. The S&P 500 faired only slightly better, returning -4.6% for the quarter. Notably, 9 out of 11 sectors posted negative returns for the quarter; only energy (+39%) and utilities (+4.8%) posted positive gains and were two relatively bright spots in an otherwise dour quarter. Emerging Markets posted slightly lower returns of -6.92%. Bonds offered no respite from the quarter’s declines; the Barclays US Aggregate Bond Index returned -5.93%, giving up some of its abnormally high, pandemic-fueled gains from the previous two years. Non-U.S. bonds posted similarly negative returns with the Barclays Global Ex-US Bond Index returning -6.28% for the quarter.
Despite the first quarter’s broad declines, we believe the quarter offers three major lessons for investors.
1 Russell 3000 Total Return
2 MSCI Emerging Markets Total Return
2 See “The Ukraine Crisis: Three Lessons for Investors”
4 YCharts, Inc.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation may come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate, but is not guaranteed or warranted by Mercer Advisors. This document may contain forward looking statements including statements regarding our intent, belief or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements as actual results may vary. This material has been provided for general information only and does not constitute personalized investment advice. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. All investments involve risk, including the possible loss of principal. Past performance is not a guarantee of future results. Diversification does not ensure a profit or guarantee against loss. Foreign investing involves special risks due to factors such as increased volatility, currency fluctuation and political uncertainties. Investing in emerging markets can be riskier than investing in well-established foreign markets Investments cannot be made in an index.
Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.