The markets posted another weak quarter with both the S&P500 and the Nasdaq Composite reaching bear market territory with a year-to-date peak-to-trough decline of 23.6% and 32.8%, respectively. The market swung from being concerned about inflation to quickly pricing in a recession. Inflation continued to stay elevated with the CPI reaching 8.6% in May, a level not seen since the early 80s. Commodities continued to climb in the early part of the quarter with energy spiking on fears of Russia further limiting supplies to Europe, before reversing. Natural Gas hit a high of $9.32 in June, a price not seen since the Great Financial Crisis but ended the quarter back at $5.42. The Fed raised its benchmark federal-funds rates 75bps at the June meeting, the biggest raise since 1994, bringing the range to 1.50%-1.75%, with potential further large increases going forward. Officials signaled their plan to continue to lift rates with projections showing a range of 3.25%-3.50% by the end of 2022, the highest since 2008. China continued to struggle with its zero-COVID policy putting further pressure on the economy from long lockdowns in Shanghai. President Xi Jinping ended the quarter by reaffirming growth targets giving hope to further government support going forward.
During the June quarter, the Dow Jones Industrial Average fell 10.8% beating the S&P500’s decline of 16.1% while the Nasdaq Composite lost 22.3%. All eleven sectors posted negative returns during the period with energy giving up some of its strong gains from 1Q, declining 5.3% over the period. All market caps performed poorly with the large-caps marginally outperforming the Midcap and small-caps. Specifically, the Russell 1000 fell 16.7% compared to the Russell Mid-Cap Index decline of 16.9% and the Russell 2000 Index, which lost 17.2% over the same period. Value stocks continued to hold up better than growth stocks, but both declined over the period with the Russell 1000 Value Index declining 12.2% compared to the 20.9% decline of the Russell 1000 Growth Index. Bonds did not provide a safe place to hide over the period either, with long-dated US Treasuries losing 12.7% while US Corporates did better with the Barclays Aggregate falling 4.7%. The US Dollar continued to move higher gaining 6.5% over the quarter, and up 13.3% YoY. Energy prices moved higher but at a slower pace with West Texas Intermediate (WTI) crude gaining 5.5% during the period. Gold lost 7.8% during the quarter while Bitcoin declined 59.1%.
All data sourced by Bloomberg.
The S&P 500 Index is a market capitalization-weighted index of 500 widely held common stocks. Investors cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The Dow Jones Industrial Average (DJIA) is an unmanaged index composed of 30 blue-chip stocks, each with annual sales exceeding $7 billion. The DJIA is price-weighted, reflects large-cap companies representative of U.S. industry, and historically has moved in tandem with other major market indexes, such as the S&P 500. The NASDAQ Composite Index is a market capitalization-weighted index that is designed to represent the performance of NASDAQ securities and it includes over 3,000 stocks. The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell Midcap® Index, an unmanaged index, measures the performance of the 800 smallest companies in the Russell 1000 Index. The Russell® 2000 Index is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. The Russell 1000 Value® Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Growth® Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Barclays U.S. Aggregate Bond Index tracks the daily price, coupon, pay-downs, and total return performance of fixed-rate, publicly placed, dollar-denominated, and nonconvertible investment grade debt issues with at least $250 million par amount outstanding and with at least one year to final maturity.
The views expressed in this commentary reflect those of Miller Value Partners analyst(s) as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results.
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