After three consecutive down quarters in 2022, the S&P 500 Index delivered a most welcome +7.56% return in the fourth quarter. While volatility kept investors on their toes, the bounce into December had good breadth. Importantly, earnings reports also remained satisfactory with most companies exceeding analyst expectations and
avoiding worst-case market fears in their forecasts.
The U.S. stock markets were negative for the second consecutive quarter with the first back-to-back quarterly declines in the S&P 500 Index since 2008-09. The S&P 500 Index fell -16.10% in Q2 and is down -19.96% YTD, the weakest first half of the year since 1970. The S&P 500 Index entered bear market territory in June, down -20% from its 1/3/2022 high, touching a YTD low of -23.55% on 6/16/2022, before rallying in the second half of June.
The U.S. stock markets were negative for the quarter as investors began to focus on changes in monetary policy, higher inflation, rising interest rates, and slower earnings momentum. Russia’s invasion of Ukraine on February 24th triggered a significant economic shift that sent many commodity prices higher and put further strain on supply chains, but also saw growth stocks rebound slightly from their early quarter swoon.
In 2021, the S&P 500 Index returned +28.71% in another strong year for US equity markets. While the market did pullback coming into October and into December, these retreats were both brief and shallow. A Santa Claus rally then capped a +11.03% Q4 return for the S&P 500 Index.
U.S. equities continued their strong momentum into Q3, with the S&P 500 Index setting new record highs 15 times in the quarter’s first 32 trading days. On August 16, the S&P 500 closed more than double the March 23, 2020 close (2237.40), the fastest doubling of the index since WWII. On September 2, the S&P 500 Index closed at a new record high for the 54th time in 2021.
Beginning the quarter with strong momentum, the market set 8 new record highs for the S&P 500 Index in the first 11 trading days. Q1 earnings for the S&P 500 Index came in at the highest level ever, with the majority of companies reporting positive surprises on both EPS and revenue.