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APRIL 2022


Global equities experienced volatility throughout March, though a late rally softened some of the sharper losses from earlier in the month. The volatility of recent months continued, driven by geopolitical events that we believe are unlikely to dissipate soon, a more hawkish Federal Reserve (Fed) and higher prices. As expected, the Federal Open Market Committee raised the federal funds rate 25 basis points at its March meeting and indicated that further increases will be needed to return inflation to its 2% goal. Chair Jerome Powell reiterated the central bank’s commitment to curbing inflation, signaling that coming rate increases could be larger if warranted.

Despite headwinds, the general economic backdrop remains favorable, notes Raymond James Chief Investment Officer Larry Adam. U.S. consumers, flush with cash, continue to spend despite rising prices; manufacturing and business spending remain healthy; and the labor market remains robust.

The broad-market S&P 500 ended the month up 3.58% and the Dow Jones Industrial Average is up 2.32%, just 5.55% and 4.27% respectively off their record highs.

Oil’s outsized impact

The Russian invasion of Ukraine has lifted oil prices globally, likely dampening the pace of growth in the near term, explains Chief Economist Scott Brown. As a result, inflation has remained elevated, reflecting higher energy prices, ongoing supply and demand imbalances related to the pandemic, and broader price pressures. The potential consumer impact drove Washington policymakers to focus on domestic economic policy, which may offer support for a reconciliation bill that invests in broad domestic energy production and enhances domestic manufacturing capability.

The war serves as a stark reminder of the importance of energy security, particularly in Europe, which imports one-third of its oil and gas from Russia. We believe that the need for a more viable long-term strategy should reinforce a shift toward wind, solar, energy efficiency and electric mobility.

Bottom line

Overall, we believe that volatility tied to geopolitical risk is likely to persist over the medium term and adds complexity to the global economic outlook. Despite uncertainty, the U.S. economy looks to have room to grow, and higher equity prices seem likely. Earnings trends remain solid and valuation multiples have become more compelling. In addition, we believe that higher Treasury rates coupled with wide spreads and increased municipal/Treasury ratios should bode well for income buyers in both the corporate and municipal markets. We are constructive on equities and believe investors should view temporary choppiness as a buying opportunity. 

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Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of Raymond James and are subject to change. Past performance is not an indication of future results and there is no assurance that any of the forecasts mentioned will occur. The process of rebalancing may result in tax consequences. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The Purchasing Managers Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing. An investment cannot be made in these indexes. Dividends are not guaranteed and will fluctuate.

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