During the first quarter of 2022, we saw stocks and bonds fall negatively together. While rare, this isn’t the first time something like this has happened. Since 1976, there have been 16 quarters in which stocks and bonds both fell at the same time. While the past isn’t a perfect indicator of what will happen in the future, it can help calm some nerves to know that we have been through similar situations before.
(Photo Credit: First Trust)
After 6 months of an event like this occurring, the stock market has been positive 67% of the time with an average return of +1.3%, while the bond market is positive 87% of the time with an average return of +5.9%. One year later, the stock market has been positive 73% of the time with an average return of +9.6%, while the bond market is positive 100% of the time with an average return of +10.7%. Three years later, the stock market has been positive 93% of the time with an average return of +12.4%, while the bond market is positive 93% of the time with an average return of +8.8%.
Another thing clients have been asking about is a recession, which would only require one more negative quarter of GDP. While this is something that is possible, it typically happens when the Fed tightens too much. With inflation well above current interest rate levels, the yield curve positively sloped, and the money supply still expanding, the Fed does not appear to be too tight currently.
At Voisard Asset Management Group, we know the importance of not only having a customized financial plan, but also sticking to that plan in times like these. As your personal situation and goals change, so should your financial plan, but the reasons should be specific to you, not simply market noise. Regularly reviewing your plan with your financial advisor is extremely important and should not be overlooked. If you haven’t created a financial plan or haven’t visited your plan in a while, we would love to assist you. It’s amazing how much a simple conversation can do for an individual!