March 2022 Stock Market Outlook – Forbes Advisor

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To make sense of what’s happening in the stock market this year requires you to make sense of what’s happening around the world. Uncertainty has become the predominant theme of 2022, and Russia’s invasion of Ukraine is only the latest manifestation of that uncertainty.

The only certainty in uncertain times is market volatility. The S&P 500 fell 3.1% in February, delivering a second consecutive month of losses. The volatility seen in the benchmarked index whipsawed investors with moves up or down in excess of 1% about every other day.

While 2022 began with the S&P 500 at an all-time high, it had plummeted nearly 12% year-to-date by late February, delivering its first correction in two years and wiping out more than six months of gains in the process.

Russia’s war in Ukraine has created a gigantic new source of worry for investors, but the factors behind the selloff go beyond just the war. They include concerns about higher inflationimpending interest rate hikes and the slowing pace of economic growth.

Uncertainty has played out in rather predictable ways beyond the stock market as well: The 10-year Treasury yield has climbed higher and is back to pre-pandemic levels, oil prices have jumped to a seven-year high and gold prices have surged.

Russia-Ukraine War Displaces Covid from Headlines

March marks two years since the Covid-19 pandemic began in earnest in the US, and it could also be the month when the virus’s death toll reaches 1 million Americans. And yet, the focus in markets has moved decisively in other directions.

“Covid has been basically wiped from the headlines,” notes Robert Cantwell, founder and chief investment officer of Upholdings. “Everyone is hyper focused on every move that’s happening between Russia and Ukraine.”

Professional investors are trying to estimate the potential economic fallout from the war. Compared with the devastation wrought by the Covid-19 pandemic in the past two years, however, this conflict isn’t likely to inflict a similar level of economic damage in the US, Cantwell says.

The relatively small sizes of the Russian and Ukrainian economies, along with an analysis of past geopolitical events, suggest the US stock market could bounce back somewhat quickly from its recent slump, says Michael Sheldon, executive director and chief investment officer of RDM Financial Group.

Russia’s war in Ukraine is likely to have a longer-lasting impact on the price of commodities like oil, natural gas and wheat, but the stock market has recouped losses from past conflicts in about six months, he adds.

Inflation and Interest Rates

In March, expect a renewed focus on inflation, interest rates and the Federal Reserve. Fed Chair Jerome Powell is scheduled to deliver a semi-annual policy report before Congress on March 2 and 3. Then, on March 15 and 16, the central bank’s Federal Open Market Committee (FOMC) is scheduled to convene—and traders widely expect policymakers to raise interest rates during that meeting. Powell is also on the books to deliver remarks at the conclusion of that meeting.

“These speeches are closely watched by the markets for clues about upcoming Fed policy and what the Fed is thinking about the current economic backdrop,” Sheldon says. Even so, there is the potential for the Fed to surprise markets, particularly if it deems that what’s happening overseas will alter its policy going forward, he adds.

The Fed’s next move is likely to contribute to volatility in the stock market, though a rising rate environment means the economy is on steady foot once again. “If the worst thing that we’re all talking about and worrying about is where interest rates are going to land, that’s a sign things are going really well,” Cantwell says.

Even so, consumers don’t necessarily share that same optimism. Americans are showing greater unease about their economic prospects again, with sentiment dipping again recently, according to the February Forbes Advisor-Ipsos US Consumer Confidence Tracker.

“Inflation has been one of the big issues in financial markets, and it’s one of the reasons why consumers are feeling very grumpy right now,” Sheldon notes. The Fed plans to raise interest rates to curb inflation that’s running at a 40-year high. And one of the key monthly inflation reports—the Consumer Price Index—is scheduled for release on March 10, just days ahead of the Fed’s upcoming meeting.

Is the Worst of the Correction Over?

March historically is a middle-of-the-road month for the US stock market, with the S&P 500 posting average gains of 0.5% going back to 1928. The volatility that’s defined the year thus far isn’t likely to go away in March , with the Russia-Ukraine conflict still simmering and the Fed’s upcoming meeting.

As for whether the worst of the correction is over, Sheldon will be looking for signs that there’s a broader rally happening in most sectors of the market and less selling pressure.

Meanwhile, March will bring some news from companies that could provide a much-needed distraction—and potentially give investors reason to push stock prices higher again. That’s because many retailers will disclose quarterly earnings reports in the month ahead.

Cantwell expects two themes to continue—company executives talking about the challenges related to finding workers and an incongruous response to earnings results in the market.

“This earnings seasonthe results from companies were pretty stable, however the reactions from market participants were pretty violent,” he says.

How to Invest in Market

The market correction serves as a reminder that declines like we’ve seen in 2022 come with the territory. And yet some investors may let their fears about volatility and their emotions about what’s happening in Ukraine creep into their investment decisions even when history suggests staying the course, Sheldon says.

If your fingers are still itching to make changes, focus on the overall diversification of your portfolio. Make sure your asset allocation doesn’t keep you up at night, Sheldon recommends. Within the equity portion of your portfolio, make sure you have a balanced investing approach between growth stocks and value stockshe adds.

If you want to buy, now could be a good opportunity to pick up stocks after prices have come down. Sheldon recommends adding international stocks because foreign markets could outperform the US stock market this year. Cantwell, for his part, is finding some “deals” on stocks with market capitalizations of $50 billion and less. “These aren’t trades; they’re long-term holdings,” he adds.

Finally, doing nothing is a perfectly reasonable approach during periods of heightened uncertainty and volatility. That’s because the prospect of panic selling and not being invested for just a few of the market’s best days can significantly alter your long-term returns.

“Time in the market, rather than timing the market, has worked in the favor of long-term investors,” Sheldon says.

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