US Stocks rebounded over the last two weeks of March to post their first month in the black of the year. Earnings for S&P 500 companies have continued to be strong as companies have been able to pass along higher production costs to the consumer. Economic news was positive over the month. US employers added 678,000 workers to their payrolls in February, the biggest gain in seven months, exceeding economist forecasts of 440,000. The unemployment rate fell to 3.8% from 4.0% in January. US consumer spending rose in February, but at a slower pace than earlier in the year. Manufacturing grew by 1% in February, with the overall economy achieving its 21st consecutive month of growth. Inflation continued to rise with the CPI hitting 7.9% over the last twelve months, matching expectations, and the producer price index rose 0.8%, slightly below estimates. The average rate for a 30-year fixed mortgage rose above 4% for the first time since 2019. Existing-home sales declined 7.2% in February as rising mortgage-interest rates increased borrowing costs.
Foreign stocks were slightly positive for the month as the war in Ukraine and high inflation continue to put pressure on foreign markets. Ukraine’s president met with the U.S. Congress to ask for further military assistance, new sanctions, and accelerate shipments of weapons. For the third time in as many policy meetings, the Bank of England raised its key interest rate to 0.75% from 0.50%. The European Central Bank left its rate unchanged at its meeting trying to weigh the economic impact of the Russian invasion of Ukraine with surging inflation numbers. China set its goal for economic growth this year at 5.5%. Economists believe this paves the way for more-aggressive stimulus measures in China in the near future. Oil prices jumped to $123.70 a barrel during the month before ending at $99.27. Oil fell 4% for the month as other energy producing nations increased supply to the market filling the void left by Russian sanctions. Emerging markets outpaced developed markets over the first quarter, but trailed developed markets in March and over the past twelve months.
Bonds continued to decline in March as high levels of inflation and the expectation the Fed will increase the Fed Funds rate more substantially incoming months pushed yields higher. The Fed signaled the likelihood of raising rates six more times this year in an escalating effort to slow inflation. Chairman Powell indicated the Fed would raise interest rates in half percentage points steps if they concluded it was necessary to bring down inflation. The 10-year Treasury yield started the month at 1.86%, jumped to 2.49%, before easing to end the month at 2.37%. Credit bonds were the top performer for March and the first quarter, while Treasuries led the way over the past year. Shorter term bonds topped longer term bonds over the month, quarter, and trailing year.
|Index Performance||March||1Q||Trailing 12 Months|
|US Stocks (Russell 3000)||3.24%||-5.28%||11.87%|
|Foreign Stocks (FTSE AW ex US)||0.32%||-5.07%||-0.59%|
|US Bond Mkt. (BBgBarc Int. Gov/Cred)||-2.45%||-4.51%||-4.08%|
|Municipal Bonds (BBgBarc 1-10 Yr Muni)||-2.14%||-4.49%||-3.86%|
|Cash (ICE BofA ML 3-Mo T-Bill)||0.03%||0.04%||0.06%|