Market Review – March 2022

March 16, 2022

Variations on a Theme

New catalysts provided fuel to the fires of inflation and volatility

Market Recap

While February began with eyes on Fed Chairman Powell’s hawkish stance, inflation and a focus on the job market, the resounding theme was Russia’s invasion of Ukraine during the last week of the month. As this evolved from a low likelihood event to a distressing reality, markets adopted a risk-off stance. As we outlined previously, volatility would be the recurring theme for the year. That said, we certainly did not foresee an armed invasion as a driving factor.

Markets trended lower in February, further adding to January’s losses across asset classes. Equity markets were broadly negative, with the S&P 500 and MSCI Emerging Markets index each down -3 percent, while the small-cap Russell 2000 gained 1.1 percent. Lurking below these monthly numbers was significant volatility, as the VIX index spiked to 31 from an intra-month low of 20. Fixed income markets were lower in the first half of the month as interest rates rose, recovering some ground later; the Bloomberg U.S. Aggregate index was 1.1 percent lower. The U.S. 10-year Treasury yield reached a post-pandemic high of 2.05 percent and subsequently dropped to 1.84 percent, roughly in line with where it began the month. Notably, crude prices added to recent gains driven by uncertainty regarding sanctions on Russia, a major crude exporter. This pushed oil toward $100/barrel, the highest level seen since 2014. Energy and real asset names benefited from this acceleration in the prices of oil and other commodities, with the Bloomberg Commodity index gaining 6.2 percent.[1]

Crude Prices and Treasury Yields Have Trended Together – Until Now

Oil prices rose toward $100/barrel, the highest level since 2014. The continued upward movement in energy prices will add momentum to inflation figures.

Source: FactSet, as of February 28, 2022.

Russia’s Role in Portfolios

Although Russia is a major commodity supplier to the rest of the world, particularly Europe, its role in investment portfolios is muted. The drawdown in Russian equities led to a halving in its size in the MSCI Emerging Markets index. Additionally, index providers such as MSCI began discussing the removal of Russian equities from indices, given ongoing market closures that made them entirely illiquid.[2] This will boost the relative size and importance of other regions in indices. Of note are Brazil and Saudi Arabia, which have benefited from the rise in crude oil and commodity prices. Their roles have been further magnified by weakness in other emerging markets.

Source: FactSet, Morningstar, as of February 28, 2022.

Use of Indices and Benchmark Return Indices cannot be invested in directly. Index performance is reported gross of fees and expenses and assumes the reinvest dividends and capital gains. Past performance does not indicate future performance and there is a possibility of a loss. See disclosure page for indices representing each asset class.

While geopolitics remain at the forefront of attention, the gears of the U.S. economy continue to churn. Despite the economic disruption wrought by the omicron variant, the job market showed strength, gaining 467,000 jobs in January, more than three times the forecast of 150,000. The bulk of these gains came from the services sector, which added 440,000 new jobs. These positive trends were amplified by upward revisions for previous months’ numbers, too.[3] Strength in consumer spending was another positive factor, as retail sales grew 3.8 percent in January, compared to a deceleration of -2.5 percent in December.[4] Given the central role of consumers in the economy, this strength bodes well for continued recovery. Further evidence of economic strength was provided by the S&P 500 showing 30.7 percent earnings growth for the fourth quarter of 2021.[5] The January CPI number of 7.5 percent was both higher than the 7.3 percent forecast and December’s 7.1 percent reading.[6] Further prospects of high inflation will be a factor in the Fed’s rate decision in coming months, especially given uncertainty regarding Russia, elevated market volatility and recent trends in commodity prices.  


Given the rapidly evolving nature of the situation in Ukraine, we continue to keep a keen eye on additional developments. Our thoughts are with those affected by this conflict and others around the world. As we outlined in our piece, In Focus – Russian Invasion of Ukraine, the key takeaways are the upside risk to inflation and Russia’s relatively muted role in investment portfolios. Although elevated oil and natural gas prices will further stoke inflation, the heightened risk arising from the invasion of Ukraine may give the Fed and its peers grounds to temper their recently hawkish tone.

We continue to adhere to the themes we have discussed in past writings, namely, preparing for volatility and inflation, as well as policy makers walking a tightrope amidst an evolving landscape. Investing for the long-term in a volatile environment remains key.

Comparisons to any indices referenced herein are for illustrative purposes only and are not meant to imply that actual returns or volatility will be similar to the indices. Indices cannot be invested in directly. Unmanaged index returns assume reinvestment of any and all distributions and do not reflect our fees or expenses.

  • The S&P 500 is a capitalization-weighted index designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
  • MSCI ACWI is a stock index designed to track broad global equity-market performance. Maintained by Morgan Stanley Capital International (MSCI), the index is comprised of the stocks of about 3,000 companies from 23 developed countries and 26 emerging markets.
  • The Bloomberg U.S. Aggregate index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.
  • Bloomberg Barclays U.S. Corporate High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as emerging markets (sovereign rating of Baa1/BBB+/BBB+ and below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included.
  • Bloomberg U.S. TIPS Index is an unmanaged market index comprised of all U.S. Treasury Inflation-Protected Securities rated investment grade (Baa3 or better), have at least one year to final maturity, and at least $500 million par amount outstanding.
  • Bloomberg Treasury U.S. T-Bills-1-3 Month Index includes aged U.S. Treasury bills, notes and bonds with a remaining maturity from one up to (but not including) three months. It excludes zero coupon strips.
  • Consumer Price Index (CPI) is a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate.

[1] FactSet, Morningstar.
[2] WSJ: MSCI Signals Potential Exclusion of Russia From Influential Indexes (
[3] FactSet.
[4] U.S. Census Bureau.
[5] FactSet.
[6] FactSet.

Use of Indices and Benchmark Return Indices cannot be invested in directly. Index performance is reported gross of fees and expenses and assumes the reinvest dividends and capital gains. Past performance does not indicate future performance and there is a possibility of a loss. See disclosure page for indices representing each asset class.

This report is intended for the exclusive use of clients or prospective clients of HCR Wealth Advisors. The information contained herein is intended for the recipient, is confidential and may not be disseminated or distributed to any other person without prior approval of HCR Wealth Advisors. Any dissemination or distribution is strictly prohibited. Information has been obtained from a variety of sources believed to be reliable though not independently verified. Any forecasts represent future expectations and actual returns, volatilities and correlations will differ from forecasts. This report does not represent a specific investment recommendation. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Past performance does not indicate future performance and there is a possibility of a loss.

*This Market Monitor is provided for informational purposes only and should not be interpreted as investment advice.

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