May 2, 2022

The equity markets declined in April, as the S&P 500 was down –8.72%, US small caps –7.81%, US mid-caps –7.11%, international developed –6.52%, and emerging markets –5.49%1.

Sharp underperformance of growth stocks relative to value stocks has continued in April, with US large cap growth stocks down –12.83% and US large cap value stocks down –4.72%1.

We remain positioned with a higher exposure to value stocks than growth stocks, which has served to reduce downside for portfolios2. The recent downside in equity markets has been caused in part by news that China has embarked on mass testing in its capital city of Beijing in response to a spike in Covid cases in the city3. This has lead to concerns that Beijing may follow in the footsteps of Shanghai, China’s largest city, most of which is under a prolonged lockdown due to China’s zero-Covid policy.

Importantly, China’s zero-Covid policy generally seems to not have been adopted thus far in other major economies around the world. We are cognizant of the risks of investing in China and other emerging markets, which is why we have no material exposure to Chinese stocks in our Income Strategy and only an approximate 1.4% allocation in Conservative Strategy portfolios3.

The 10yrTy rose in April from 2.34% to 2.94%1. After the yield rose significantly by mid-April, we modestly increased the average maturity length of the bonds underlying the fixed income side of our Investment Strategies. We remain positioned for interest rates to continue to rise over time, albeit at a slower pace that may enable fixed income to resume positive returns.

The Consumer Price Index, a barometer commonly used to measure US inflation, rose +8.5% from March 2021 to March 2022, though we expect that inflation rate to slow down by the end of year4. Market participants are currently pricing in a 54.6% probability that the US Federal Reserve may raise its short-term interest rate from the current 0.25%-0.50% range to above 3.00% by December 2022, though we think this fear is overblown5.


External sources: Bloomberg data1, Morningstar2, CNBC.com3, US Bureau of Labor Statistics4, CME5.

For more information about our investment philosophy, see MTC Wealth Management.


Non-deposit investment products available through Members Trust Company are not deposits of or guaranteed by the trust company, a credit union or credit union affiliate, are not insured or guaranteed by the NCUA, FDIC or any other governmental agency and are subject to investment risks including possible loss of  the principal amount invested. Members Trust Company, owned and managed by America’s credit unions, is a special purpose federal thrift regulated by the Office of the Comptroller of the Currency. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Past performance is not indicative of future results. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant. Any opinions expressed are those of the presenter and do not necessarily reflect the position of Members Trust Company.