The S&P 500 returns to the top 50% since the declaration of the global pandemic two years ago
Today, March 11, marks the second anniversary of the state of emergency declared for the COVID-19 pandemic, a seismic event that had global effects, impacting all aspects of people’s lives.
The past two years have been marked by significant turbulence. There have been more than six million deaths from COVID-19, according to Johns Hopkins University, widespread and long-lasting supply chain disruptions, crucial elections leading to policy change, searing inflation reaching almost both numbers and a raging war between Russia and Ukraine, causing human tragedy and global economic uncertainty.
These profound events rocked the markets, leading to nauseating levels of turbulence and investor insecurity; however, reviewing the past two years may ease longer-term investor panic.
While the S&P 500 Index is down 10.63% year-to-date and the S&P 500 Equal Weight Index is down 7.42% year-to-date, cushioned by its higher exposure to energy, which was the best performing sector in the index. in 2021 and since the start of the year, the market’s ability to recover and rebound despite significant disruptions is promising.
From March 1, 2020 to March 1, 2022, the S&P 500 and S&P 500 Equal Weight indices returned 50.45% and 52.38%, respectively, according to data from YCharts.
Meanwhile, the two-year Treasury rate was 1.31% on March 1, 2022, slowly rising as interest rates rose.
Some inflationary pressures continued to worsen, with the CPI hitting a four-decade high of 7.9% in February year-on-year, which has not yet taken into account the surge in energy prices as well as other raw materials due to the Russian-Ukrainian crisis, which has raised expectations of significant increases in interest rates.
However, contrary to popular belief, US stocks have generally performed better during Fed tightening cycles than during Fed easing cycles, According to Talley Léger, Senior Investment Strategist at Invesco.
Fed tightening happened in the second half of US economic cycles 67% of the time, and Fed easing overlapped US economic recessions 67% of the time, according to Leger.
Further downside and volatility are expected as Russia’s invasion of Ukraine came as a huge surprise to markets, as evidenced by the sell-off in equity markets as well as some speculative activity in commodity prices; Neverthelessanalysts predict markets will begin to rally as the global economy adjusts to expectations and digests such a dramatic deviation from conventional expectations.
So for investors with a longer time horizon, Kristina Hooper, chief global market strategist at Invesco, suggests now is not the time to give up on stocks. On the contrary, Hooper believes that now is the time to diversify well between and within asset classes, including alternatives such as commodities.
Solid offers to consider in the current economic climate are the Invesco S&P 500 Equal Weight ETF (RSP) and the Invesco ESG S&P 500 Equal Weight ETF (RSPE).
Opting for an equal-weighted index, as opposed to a market-cap-weighted approach, can provide diversification benefits and reduce concentration risk by weighting each constituent company equally so that a small group of companies does not have not have a disproportionate impact on the index.
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