April’s decline felt across asset classes

Ed Mertiri |

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U.S. equities continued to face obstacles in April, as poorly received earnings, especially from Big Tech, along with inflation fears and looming Fed rate hikes spooked markets. The hopes that a strong earnings season could alter the bearish action early in the month, were dashed after Amazon’s disappointing Q1 report.

The S&P 500® posted a loss of -9%, logging its worst monthly performance since March 2020. The index also broke past it’s previous March lows, setting the market for further downside as earnings season continues. Large Cap growth was the hardest hit in April. The S&P 500 Growth index lost -12.5% in April versus the -5% loss in the S&P 500 Value index. The S&P MidCap 400® and S&P SmallCap 600® were down -7% and -8%, respectively. While almost all equity classes ended April lower, the higher value stocks were hit the hardest.

International equities also disappointed in April, with the S&P Developed Ex-U.S. BMI down -7% and the S&P Emerging BMI down -5%. Lockdowns in China added to international malaise.

The US 10-year note sold off for most of April as the yields (moving inverse to prices) tests the 3% hurdle. The inversion in the US treasury markets has flattened to just two slight inversions between the 7 and 10 year and the 20 and 30 year, from a much wider duration range a month ago. US GDP contracted -1.4% in Q1, potentially making it the first quarter of a recession if growth continues to contract. If it turns into a recession (2 or more quarters of contraction) it might be the first that started before treasury yield inversion appeared.

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