Quarterly Market Review: First Quarter 2022

It’ll come as no surprise to most that major stock and bond indices finished the first quarter of 2022 in the red. The combination of shocking (and heartbreaking) geopolitical events and inflation concerns contributed to mid-single digit losses for U.S., developed international, and emerging markets stocks (see page 3). Companies with strong cash flows and less dependency on debt tended to perform better than the stock market as a whole.

Rising inflation expectations pushed interest rates up. The increase in rates resulted in bond index prices declining by 4% to 6% (also page 3). Rising rates aren’t all bad news, however, as individuals reinvesting income will do so at higher yields, something many investors have been wanting to see since shortly after the start of the COVID-19 pandemic.

Though it may not have felt like the case during the quarter, stock and bond returns were still overwhelmingly positive on a one, five, and 10-year basis (page 4). As expected during a market correction, valuations moderated substantially since the start of the year. For example, the 12-month forward price-to-earnings (P/E) ratios of U.S. and non-U.S. stocks – a common measure for the ‘expensiveness’ of the stock market – were 19.5x and 13.2x, respectively, down from 21.2x and 14.3x at the end of 2021.

If you’re interested in a deeper dive of the goings on in the markets during the first quarter of 2022, please feel welcome to check out the quarterly market review below.