The market has been concerned about many things, such as the Ukraine War, the Fed raising rates, inflation, corporate earnings growth, and now a negative GDP print for Q1. This correction feels worse than just a correction - more like a full-fledged bear market. Sometimes we forget this feeling - how bad it feels. I think this one has been particularly rough because of the fixed income/bond situation. If a balanced portfolio has 60% stocks and 40% bonds, and stocks go down a lot, but bonds go up a little bit, we are down but not out. But when stocks and bonds go down double digits together, well, that's where we find ourselves at the moment.
Now it is time for some market perspective. We know there is on average about one correction per year (as defined by a 10% pullback). And we know that average pullback is around 14% (see chart pictured). And we also know a year later the market is usually much higher (see the same chart). Furthermore, we know the long term market returns are tightly correlated to earnings. Earnings season has just begun, but so far revenue growth and earnings per share growth are on track to beat estimates. In fact, 77% of companies have beat revenue estimates and 80% have beat earnings estimates.
This week will be dominated by earnings, the Fed (who meets on Wednesday and will be raising rates again), and the April jobs number which will be released on Friday. This news cycle will have plenty of influence on the markets this week - and after four devastating weeks in April, it might not require much good news to be a catalyst for a relief rally.
As always, we are here for you if you would like to speak further about your accounts or about your big picture financial plan.
PS don't forget about the shredding event this Wednesday from 4-6pm. Shred your old documents as well as your old electronic devices!