A year into this extraordinary period for investors, the market’s response has been surprising in a number of ways
Here’s the scene: It’s March, 2022 – one year ago – and the U.S. consumer price index is rising toward a four-decade high of 8.5 per cent. The Federal Reserve has just raised its key interest rate for the first time since 2018, in recognition of “elevated” inflation.
But, he added, the current valuation for the S&P 500 is higher than prepandemic average levels in 2018 and 2019 and much higher than he would have expected given the Fed’s aggressive rate hikes.may not have been obvious a year ago. Britain’s FTSE 100 index has risen 10.3 per cent over the past year, and Japan’s Nikkei 225 isn’t far behind with a gain of 9.7 per cent.
The price of gold may have surprised some investors too. Though widely praised as a hedge against inflation, it has been sensitive to the rate increases that have followed. Gold is down about 8 per cent over the past year.It is hardly surprising that bonds have struggled as central banks raised interest rates: As rates rise, bond yields follow, sending bond prices down. Popular bond exchange-traded funds are nursing double-digit losses over the past year.
High-yield bonds, issued by companies with credit ratings that are below investment-grade, offer another surprise: ETFs tracking these economically sensitive assets have been holding up relatively well.
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