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EXCERPT FROM CLIENT LETTER 4/8/2022 (see full letter above for tables, charts, and full commentary)
FROM THE DESK OF BOB CENTRELLA, CFA April 8, 2022
Usually I like to open my letter with some witty repartee and I was going to make some reference to the Oscar’s “slap” heard round the world. But this quarter did not have much to be happy about given the Russian invasion of Ukraine, continuing (but lessening) Covid infections and record inflation to name a few negatives. So the real slap in the face was that the first quarter of 2022 was our worst quarter since Q1-2020, the beginning of Covid. The market started the year heading down on inflation and Fed rate hike fears and never quite got going. It took a March rally from the depths to bring the S&P 500 return to -4.61% for the quarter as the market hit a low of -13% during early March when the Russian invasion of Ukraine heated up. The Nasdaq actually declined over 20% from its peak, signalling a bear market decline. Here’s a negative alert – I apologize but when you look at your statement you will see negative signs in the return column. There weren’t many places to hide unless you were an energy, commodity or utility fund. And the bond market offered no protection as prices dropped causing the Barclays Bond Aggregate to drop -5.85% in Q1. More on bonds later. During the quarter, we were more busy than normal on the trading side as we rotated out of some positions and into others that we thought would be better suited for the volatile environment while still offering good upside. I anticipate the rest of this year may offer more of the same.
There were some positive returns this quarter but largely it was a difficult period to make money unless you were in commodities. Below is a list of various assets classes price changes (not total return) for the quarter.
(See Letter above for table)
Natural gas jumped 51%, oil prices +33%, Wheat +30.5%, and corn, cotton, soybens all rose above 20% --- hence, inflation. Among traditional assets Gold rose 6.7% and Silver +7.7%. Bitcoin fell 4.5%.
Capitalization and Style: The S&P 500 dropped -4.95% while the Dow fell -4.57% and the Nasdaq -9%. Soaring interest rates hurt Growth stocks. Value did much better than Growth overall with Large Value -.60% outperforming Large Growth -8.6% while Smallcap 600 Value -1.83% bested Small Growth -9.73%. Similary MC Value -.63% outperformed MC Growth -9%.
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Bob Centrella, CFA
Forza Investment Advisory, LLC
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