During the period, the S&P 500 Total Return Index fell 16.10% for the quarter and is down 19.96% for the year. The Barclays U.S. Aggregate Bond Composite Index fell 2.93%% during this period and is down 7.48% for 2022. The 10Y finished the quarter at 2.97%, up from 2.34%.
This has been the worst six month start for the stock and bond markets in over 50 years, caused by rising inflation and interest rates as well as increased recession fears. Investors lost their appetite for risk in 2022, as the most speculative areas of the markets showed the largest declines while traditionally safer investments, such as bonds, also experienced declines. During the quarter, the economy experienced the most rapid increase in inflation and the most dramatic decline in consumer confidence in four decades. At the same time, the Fed started its process of rapidly raising short-term interest rates and reducing its balance sheet. We are concerned that economic conditions may deteriorate further but feel the market has already priced in that downturn.
The focus will soon turn to corporate earnings and the outlook for the second half of the year. While we believe that current conditions favor steady corporate earnings and stable interest rates, we are concerned that economic conditions may deteriorate further.
Previous periods of market volatility have demonstrated that trying to time the market is a difficult and typically underperforming pursuit. For long term investors, simply staying invested is the most prudent investment strategy. In addition, we encourage investors to manage risk by staying in their asset allocation range and maintaining a diversified portfolio.