April Market Update
With its 2.8% drop on Friday, the S&P500 (500 largest companies in America) is now down 10.4% for the year.
The markets responded to news Federal Bank Chairman Jerome Powell is considering additional interest rate increases of up to 0.75%. The bank had earlier indicated a 0.25% increase would be sufficient. The bank is responding to increased inflation data, which it will combat with higher interest rates to slow our economic growth.
“We’re likely to see more spikes in volatility as the Federal bank embarks on a more aggressive pace of rate hikes” says Liz Ann Sonders, Schwab’s chief investment strategist. “As interest rates increase against a backdrop of high oil prices, war in Ukraine, and a lingering pandemic, the risk of recession increases.”
As you can see with the chart below, our markets have a history of continuing to rise (yellow line) during interest rate increases (indicated by grey bars).
We strongly recommend investors refrain from reducing risk at this point. Our markets have survived much more severe environments than the one we currently face.
As Warren Buffet recently reiterated, “The markets will reward the patient investors”.
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