Perspectives - May 2022 - Performance

Summary and performance of the month

April was the worst monthly performance for stocks since March 2020 as economic data came in showing extreme weakness across the board.

The dollar continues to strengthen, with the DXY reaching its highest levels in 20 years. There is a mix of dollar appreciation and other currencies falling.

GDP, contrary to all expectations, performed poorly, turning negative for 1Q 2022.

The economic news was compounded by poor earnings and outlooks for major companies, which drove the indices lower.

Macro Corner

We advocated defensive positioning last month after a strong technical rally led many to believe the downside in the markets was done. The siren call to buy the dip lured investors, but the reality of a slowing economy and weaker than expected earnings sunk in over the last 4 weeks.

For the Fed, the fear was that the economy was heating up and that the covid-19 stimulus boost would be enough to ensure economic growth well into 2022. However, the final days of the month served market participants a surprise: GDP contracted in the first quarter, for the first time since the start of the pandemic.

GDP performance

In addition to the negative GDP performance, other markers of economic growth, such as housing, have been declining. New home sales, used as a benchmark for consumption, fell to a four-month low in March, dropping 8.5% month-over-month. As mortgage rates soar above 5%, housing becomes unaffordable. Existing home sales also fell during the month, dropping to June 2020 levels.