Friends, so far the 2020's have, shall I say, left something to be desired. Personally, I prefer 2019, so can we have that back!?! Of course, I speak of the global pandemic of the past 2 years, inflation, and now conflict in Ukraine, with the latter two being more recently relevant.  

The new year got off to a rocky start, with nearly all major asset classes finding themselves in negative territory. U.S. large cap stocks declined by just over -5% during the month of January, while U.S. investment grade bonds lost -2.15%. The primary cause of the decline appeared to be a combination of seemingly related factors, which included – concerns around inflation, sharply higher interest rates, and hawkish rhetoric from the Fed.

2021 was a unique year for asset class returns, with U.S. stocks soaring higher by 28.71%, while investment grade U.S. bonds declined by just over -1.54%. This has caused investors’ portfolios to drift away from their target allocations, leaving many with an overweight to equities and a corresponding underweight to fixed income.

Over the past week, we have received several calls regarding what appears to be large drawdowns in certain ETFs in our portfolios. In both instances, the drawdowns resulted from large dividend or cap gain distributions, not actual losses. It is common for a fund or ETF to trade “ex” the dividend a few days before seeing the dividend post to accounts. At first glance, it can take you by surprise, with the immediate reaction being poor market performance as the likely cause.

News of a new COVID variant, dubbed Omicron, and hawkish language from Fed Chair Jerome Powell led to a volatile month for both equity and fixed income investors. Equity markets ended the month lower by -0.69%, despite starting November on strong footing. This decline began on Black Friday and coincided with the announcement of the newly discovered Omicron variant.