Performance Source: Koyfin
U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of -5.0% for the First Quarter of 2022. U.S. stocks marginally outperformed international again for the quarter as measured by the iShares MSCI EAFE ETF, a representation of international stocks outside the U.S. EAFE total return for the First Quarter of 2022 was -6.5%.
The eruption of conflict in Ukraine weighed on equity markets in the first quarter. High inflation and impending rising interest rates also caused concern for stock prices. A very large amount of funds have been allocated to Europe in response to the Ukrainian conflict. Spending in Europe will likely rise as relocation and rebuilding efforts commence. The human toll is unfathomable and the financial impact will be interesting to see evolve.
A few of the top performing international countries for the fourth quarter included Brazil, United Arab Emirates and Saudi Arabia—all countries that benefit from strengthening energy markets. Russian stocks have fallen over 70% year-to-date as sanctions against the country were put in place and have strengthened.
U.S. Sectors
Top performing U.S. S&P 500 sectors as reported by Koyfin for the First Quarter of 2022 by total return include Energy (39.1%), Utilities (4.7%) and Consumer Staples (-1.1%). Laggards for the First Quarter include Communications (-11.2%), Consumer Discretionary (-9.4%) and Technology (-8.4%).
The fear trade was front and center in the first quarter with inflation-oriented and needs-based investments leading performance. Energy stocks enjoyed another rally as energy supply dropped substantially with Russian oil taken off the trading table. Utility and consumer staple stocks were also impacted by the Ukraine conflict as base necessities rose in importance.
The opposite side of a fear trade is highlighted by stocks with high valuations and growth fueled by “nonessential” items that may drop in demand in the face of rising inflation and conflict. The sharp divergence between sectors with positive and negative performance highlights uncertainty in investment markets at this time.
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