March Madness

Weekly Market Update | March 21, 2022

Highlights

Globally, stocks surged with the MSCI AC World Index climbing 5.7% as oil prices eased amid growing rumors of a Russia / Ukraine cease fire. In the United States, the S&P 500 jumped 6.2% while the NASDAQ rocketed 8.2% higher. The Dow Jones rose a strong, but more subdued 5.5%. European stocks climbed by 6.1% while Japanese stocks leapt 4.5%. Emerging markets underperformed, but still returned 3.5% during the week. The 10-year U.S. Treasury yield spiked nearly 16 basis points to 2.15%.

The Federal Reserve decided to hike interest rates for the first time since December 2018. The central bank also projected that it would raise rates an additional six times by the end of this year and another three to four times in 2023. This was largely in line with what investors expected.

Calls for a U.S. recession have risen as the spread between the 10-year U.S. Treasury yield and 2-year U.S. Treasury yield have narrowed. We would point out that the yield curve has yet to invert, and even when it does, history suggests that a recession is not imminent and that equities can still move higher. During the last five inversions, it took an average of 14 months before the economy experienced a recession. The S&P 500 peaked about nine months after with an average return of 19.4% between inversion and its peak. The weakest return was 8.4% when the yield curve inverted in February 2000 and the S&P 500 peaked in March 2000.