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Capital Markets Commentary

Stocks finished lower in the first quarter with major stock indices correcting. Inflation rates continued to cause concerns with the February Consumer Price Index (CPI) rising at the highest 1-year level in 40 years. Investor sentiment was lower at the end of the quarter, citing the potential for a recession with the 2-year Treasury yield briefly jumping higher than the 10-year yield. Yield curve inversion has typically preceded recessions in recent years. Geopolitical tensions stemming from the Russian invasion of Ukraine began to accelerate trends of de-globalization as many countries are looking to decrease reliance on foreign goods. Global COVID-19 cases saw a sharp decline from the peak of the Omicron variant earlier in the quarter, supporting hopes that pandemic-related stressors may be on the way out. For the quarter, the S&P 500 lost 4.60%.

The Energy sector outperformed the market during the quarter driven by supply chain disruptions and sanctions against Russian oil. Utilities also performed better than the overall market. Communications and Consumer Discretionary underperformed with Technology and Real Estate following closely behind.

Small Cap stocks underperformed the S&P 500 for the quarter as the Russell 2000 Small Cap Index lost 7.53%. International stocks also lagged the S&P 500; the MSCI EAFE International Index lost 5.79%.

Long-term Treasury Bond yields were higher. The 10-year Treasury yield rose from 1.51% to 2.32% during the quarter. The Bloomberg Aggregate Bond Index lost 5.93% for the quarter.