- The unusually long period of market calm ended in the past week, with major equity indexes moving lower.
- The primary catalyst for this move appears to be a byproduct of economic strength, and specifically indications that inflation pressures are building. Longterm interest rates have moved higher in response, and investors are recalibrating their expectations for further Fed rate hikes.
- The recent selloff in equities reflects a shift in investor sentiment, but we believe that fundamentals supporting the market haven’t materially changed. The economic outlook remains positive, fiscal policy should be supportive, and even as the Fed continues to tighten, interest rates remain relatively low.
- We don’t believe that recent market performance is indicative of broader issues, but should take some of the froth out of equity valuations. The fact that equities haven’t experienced a meaningful correction in two years was unusual. The return of volatility, if anything, suggests a return to more normal market conditions.
- During periods of market turmoil, investors would be well served to make decisions within the context of their long-term plan, which not only considered the potential that equity markets may experience bouts of volatility, but the certainty that they will.
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Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.