Reviewing April's Market

Ed Lindbloom |

It is very important to us that you are well informed about what’s happening in your investment accounts. Here is a brief recap of the past month.

As a reminder, we utilize sophisticated quantitative techniques to manage the models. Level Elements are designed to manage your model’s equity and fixed income exposure over time. This level dynamically changes as fundamental, quantitative, and economic data changes. Style Elements are designed to manage what is in those equity and fixed income exposures. The Style Elements used within your model can range from being tax-aware to opportunistically seeking excess returns through minor asset class allocations.

Market Overview

April was a sea of red numbers across capital markets with the combined forces of inflation, weaker than expected economic performance, and a Fed shifting into a higher gear all took their toll on markets. Not helping matters were a few higher-profile earnings misses and the first quarter results not continuing the momentum from the prior few quarters.

Bonds did not provide a safe haven either in an environment with the Fed raising rates and the economy contracting last quarter. Typically, the market can digest rate hikes more easily on the back of strong economic performance. Anxiety around the coming quarters can be seen in the US yield curve, which is effectively flat from the 2-year to the 30-year. Unsurprisingly short-term bonds outperformed in a relative basis, with the Bloomberg US Aggregate 1-3 Year index down 0.56% compared to the US aggregate down 3.79%.

First quarter GDP showed a surprise contraction to start the year. Economists surveyed by Bloomberg had expected the economy to grow at a 1.0% annualized rate, but instead contracted at a 1.4% rate. The Fed meets again in a few days and the market expects a 50 basis point hike, the first two-step hike, as the Fed tries to move faster to combat inflation.

Source: Helios Quantitative Research, Bloomberg