Equity Overview

Stocks rebounded in March from their February lows, as most sectors gained ground.  Utilities, energy, and real estate stocks were strongest and financials were the weakest. No trend was apparent between growth and value stocks, or among large, medium, and small cap stocks.

Volatility was dramatic, as the S&P 500 moved more than 1% on 14 of 23 trading days during the month.

Macro Overview

Economic data reported in March was mixed.  Employment was strong as U.S. employers added 678,000 jobs and the unemployment rate fell to 3.8%.  (Employers have added at least 400,000 jobs per month since May 2021, the longest streak on record.)  Manufacturing showed growth, retail sales were higher, and consumer confidence improved.  But durable goods orders declined and housing was weak as mortgage rates increased.  In addition, inflationary pressures persisted as the Consumer Price Index rose 7.9% and set another 40-year record.

As expected, the Fed raised the benchmark interest rate by 0.25%.  It also indicated that it would be raising rates at each of its remaining six meetings this year.  In addition, the Fed officially ended its quantitative easing policy and suggested that it will soon begin to sell bonds and reduce its record $9-trillion balance sheet.

Meanwhile, the war in Ukraine continued to dominate headlines.  Its precise economic damage cannot be predicted but commentary suggests it will be substantial.  Ukraine could sustain as much as a 40% hit to its GDP this year.  Russia is confronting default on its debt and has been effectively shut out of world trade—with the exception of oil exports, which the EU may be about to sanction.  Prices of grain and fertilizer—of which Ukraine and Russia are important exporters—have spiked, and threaten food insecurity in numerous undeveloped countries.  And both the World Bank and the International Monetary Fund have lowered their global growth projections significantly.