The S&P 500 Index fell 4.6% during the first quarter of 2022, with growth stocks leading the market lower. This decline is due primarily to the unrelenting ascent in longer term interest rates, which in turn hurts the valuation of growth companies. Furthermore, bond indices performed even worse during the first quarter than the S&P 500. The Bloomberg U.S. Aggregate bond index—largely U.S. Treasuries, highly rated corporate bonds and mortgage-backed securities—returned minus 5.9% over the first three months of the year, its biggest quarterly loss since 1980. Yields, which rise when bond prices fall, climbed as investors tried to balance rising costs, higher wage gains and the Federal Reserve’s signal that it will be more aggressive with interest rate increases. Despite the turbulent start to the year, the US consumer has remained resilient and only time will tell if higher interest costs will curtail purchases, especially services vs. goods, as we shift to a post-pandemic era.

Continue reading for our investment approach in a volatile market and our long-term perspective as we look ahead.