The first quarter of 2022 is over and despite some pretty intense volatility the U.S. stock market held up relatively well.
After being down as much as 14%, the S&P 500 (SPY) closed the first quarter with a 5% decline.
The tech heavy NASDAQ 100 (QQQ) was down as much as 21% but closed the quarter with a 10% decline.
- The Vanguard Global Stock Market (VT) was down 6%.
- The iShares Mid Cap Index (IJH) was down 5%.
- The iShares Small Cap Index (IJR) fell 6%.
Here is a 5-year chart on the S&P 500. You can see the big gains in 2020 and 2021 and then the recent pullback in the first quarter of 2022.
*chart from tradingview.com
Here’s a chart on the top performing sectors of the quarter. Energy and utilities were the only two sectors to finish in the green. Take a look below.
*chart from csimarket.com
What Should We Expect Moving Forward?
Looking forward, in the short run I expect global markets and stocks to remain volatile for a few reasons.
- Inflation at a 40-year high.
- Rising interest rates slowing economic growth.
- War in Europe.
- Potential recession in the second half of 2022.
However there are still reasons to be optimistic and I believe there is a strong possibility stocks will close the year with a gain.
The main reason – we just saw a huge pullback in stocks. The S&P 500 was down as much as 14% in the first quarter and the NASDAQ was down as much as 21%. That is a big decline and they are fairly rare. Those kinds of declines usually only happen once every few years and I think its unlikely we’re going to see another big pullback like that again this year.
Also, keep in mind that the stock market is forward looking by 3-6 months. So this recent decline was most likely driven by expectations for a recession in the second half of the year – and now it appears the stock market is already looking beyond a potential recession with this recent rebound off the low.
Here is My Plan for the Second Quarter
While I’m optimistic on stocks, this still looks like a time to be more conservative. That means focusing on index funds, bond funds, dividend stocks and blue chips. I also still like food and energy stocks a lot. As always my plan is to try and avoid buying at the high and look to buy on a dip when stocks are down. Or buy on days when the stock market has a big down day.
As always the goal is to get more cash into the market. Studies have clearly shown that trying to time the market doesn’t really work and that the more time you spend invested in the market, the higher the probability for success.
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
Author Michael Vodicka owns shares of Shares Core S&P 500 (IVV) Nasdaq 100 (QQQ), iShares MidCap Index (IJH), iShares SmallCap Index (IJR), Vanguard Global Stock Market (VT).
