Spring 2022 Investor Letter: We Have Liftoff

Insights | Spring 2022 Investor Letter: We Have Liftoff
Q1 2022 investor Letter Cover

Author: David I. Templeton, CFA, Principal and Portfolio Manager

The worst kept secret in the first quarter was the Federal Reserve embarking on a tighter monetary policy. The Fed increased the Fed Funds rate by 0.25% or 25 basis points in March. There are six remaining scheduled Federal Open Market Committee meetings this year and the Fed Funds’ futures market is expecting increases at each of those meetings. In the first quarter of this year the below chart shows crude oil is up more than 27% and, as the month of March got underway, crude oil prices more than doubled from the same time a year earlier. Higher energy prices can be a headwind for economic growth as discussed in more detail in our Investor Letter.

First quarter 2022 asset class returns

With the Fed intent on reigning in inflation via higher interest rates and a reduction in the Fed’s balance sheet, a midterm election year and the unfortunate humanitarian crisis resulting from the Ukraine/Russia conflict, additional market volatility is likely over the next several quarters. As the Investor Letter is written, Investors should keep in mind though, nearly 63% of S&P 500 stocks are already down more than 10% from their 52-week high. The market tends to react favorably to corporate earnings growth and earnings for S&P 500 companies are expected to growth 9.6% in the next 12-months. Certainly, there is much one can be concerned with, keeping in mind though, the market likes to ‘climb a wall of worry.’ More of our insight is accessible at the Investor Letter link below:

HORAN Capital Advisors, LLC is an SEC registered investment advisor. The information herein has been obtained from sources believed to be reliable but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Market conditions can vary widely over time and there is always the potential of losing money when investing in securities. HCA and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.