May 5, 2022

Market Commentary May

On Wednesday, following the Federal Reserve decision to raise interest rates, the stock market surged. Today—just a day later—stocks cratered, doing the sharpest U-turn ever.

Yesterday, traders celebrated the Federal Reserve’s policy decision. Today they worried that monetary policy-makers might struggle to tame high inflation amid the lingering threat of a recession. A mixture of rising rates and a slowing economy breeds stagflation; those of us who experienced the 1970s remember it well.

Market volatility is unsettling, but not unusual. Over the past 20 years, the stock market has suffered a calendar-year pullback of 15% on average, while market returns have averaged approximately 9%. In other words, as my colleague, Bobby Hawley, said to me this morning, “This isn’t our first rodeo.”

While the current environment is unique, history is clear—maintaining a long-term focus during periods of volatility is crucial to meeting our investment objectives. Panic is never a good strategy. Discipline and prudence will always ultimately prevail.


Gary W. Kidwell