It’s been easy being a buy and hold investor. Until now.
Stock market investments, as measured by the Standard & Poor’s 500 index, approximately doubled in value in the past five years. It was up 26.9% in 2021, 18.4% in 2020 and 31.5% in 2019, and it is 59.3% higher than at the bottom of the Covid bear market in March 2020.
The stock market suffered another losing week and is in the throes of the longest weekly losing streak in over a decade. Here’s what investors need to know.
The Federal Reserve raised its policy rate by a half-percentage point on Wednesday for the first time since 2000, and Fed Chairman Jerome Powell at a press conference Wednesday repeatedly said “inflation is too high.” He indicated that the central bank would raise rates by another half-percentage point in both June and July
Inflation is raging at its highest rate in 40 years. Fed tightening has increased investor nervousness that the Fed would raise rates too much in the months ahead to tamp down inflation, and that it would end the two-year economic expansion. However, the Fed chairman also emphasized repeatedly at his press conference Wednesday, that the economy is nowhere near a recession currently.
Friday morning’s job situation report brought good news. Employers added 428,000 jobs in April. The unemployment rate remained at 3.6%, and the number of employees is nearly fully recovered from the peak reached during the last expansion before the pandemic struck.
The Institute for Supply Management (ISM) index of manufacturing activity in April was 55.4 and, more importantly, the ISM’s index of purchasing manager activity stood at 57.1. While both indexes have cooled from a boil in the past year, they are both nowhere near the reading of 50 that would indicate a recession might be near.
The Standard & Poor’s 500 stock index closed this Friday at 4,123.34. The index lost -0.57% from Thursday and is down -0.21% from last week. The index is up +59.3% from the March 23, 2020 bear market low but down -15.1% from the January 3, 2022 all-time high.