Q1 2022 Quarterly Market Commentary

A Volatile First Quarter

The market is attempting to catch its breath as the first quarter of 2022 ends. There were no shortage of events for investors to navigate, including the Federal Reserve’s first interest rate increase since December 2018, Russia’s invasion of Ukraine, and continued high inflationary pressure. These events sent the markets and investors on a roller coaster ride.

This commentary reviews the first quarter market performance and discusses the key market themes impacting portfolios as we move into the second quarter.

Stock Market Recap

The S&P 500 declined 4.6% during the first quarter, outperforming the Russell 2000’s 7.5% decline. This was the S&P 500’s first negative quarterly return since 1Q 2020 and the fourth worst quarterly return since 1Q 2013. 

While the -4.6% return may seem muted, it masks the S&P 500’s volatile first quarter. U.S. stocks experienced significant selling pressure during January with the S&P 500 suffering its biggest monthly selloff since March 2020. The volatility continued into February, and by early-March, the S&P 500 was down 12.5% since the end of 2021. However, performance turned around during the second half of March with the S&P 500 registering a 9% return. Following the rally, the S&P 500 ended the first quarter only 5% below its early January record close.

Energy was the top performing sector, returning 39% as oil prices soared 30%. Conversely, Communication Services, Consumer Discretionary, and Technology were the three worst performing sectors due to their large allocations to growth stocks, which experienced a sharp negative decline in the first quarter.

International stocks underperformed U.S. stocks. The MSCI EAFE Index of developed market stocks produced a -6.5% return during the first quarter, while the MSCI Emerging Market Index produced a -7.6% return over the same period. U.S. dollar strength was a headwind for international stocks as it causes currency translation losses.

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Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request. Past performance is no guarantee of future results. CAR-0422-01317

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