During March most equity markets worldwide gained ground, reversing two straight months of declines. The present geopolitical tensions in Eastern Europe have added to the market’s “wall of worry”. This on top of inflation concerns, along with corresponding Federal Reserve monetary policy, caused markets to get over-pessimistic. Thus, buyers took advantage of marked-down equities. Solid gains were seen throughout the major U.S. equity indexes in March.
As we continue through the economic recovery, battling through the remnants of COVID-19, the present geopolitical struggle in Eastern Europe has investors concerned about the global economic output. On top of this, inflation is proving stickier than many anticipated. The Fed’s hawkish view, along with the bond market, has affirmed this.
Market participants are presently weighing the effects of all these factors, leading to higher volatility in financial assets. Presently, amid these challenges, S&P 500 Index company fundamentals appear intact. Q1 earning reports will provide a clearer view of company as well as supply-chain fundamentals. Our base case continues to be that inflation should begin to stabilize once supply chains are fully operational and labor shortages ease. In addition, in our view, the health of the consumer should continue to be an important driver for the economy and corporate profits in 2022.
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