The Fed Funds futures market is pricing in roughly 10 quarter-point rate hikes this year. The benchmark 10-year yield was up +56 basis points for April. 2022 so far has seen the worst total return start for the 10-year Treasury (or proxies) since 1788, just before George Washington’s presidency. It appears that much of this tightening cycle has already been priced into the bond market – even though the Federal Reserve has only raised rates once so far.

Here are 3 things you need to know:

1. First quarter (Q1) gross domestic product (GDP) showed a -1.4% annualized real contraction. The contraction was due to weak inventory spending, a record trade imbalance (driven by a jump in imports), and a pullback in defense spending. However, consumer spending, which represents 2/3 of the economy, held up well in Q1.
2. The S&P 500 index lost -8.8% for the worst monthly showing since the March 2020 Covid-19 related selloff. The S&P 500 index has now fallen -13% during the first four months of the year, its worst start since 1939.
3. The tech-heavy Nasdaq Composite lost -13.3%, the most since October 2008 during the Great Financial Crisis of 2008-2009. The Nasdaq Composite is down -17% for the first four months of the year, its worst start to a year on record going back to 1971.

Sources:

1. Sources: J.P. Morgan Asset Management – Economic Update; Bureau of Economic Analysis (www.bea.gov); Bureau of Labor Statistics (www.bls.gov); Federal Open Market Committee (www.federalreserve.gov); Barron’s, Deutsche Bank, John Hancock Investment Management
2. Indices:
   • The Barclays Aggregate Bond Index is a broad-based index used as a proxy for the U.S. bond market. Total return quoted.
   • The S&P 500 is designed to be a leading indicator of U.S. equities and is commonly used as a proxy for the U.S. stock market. Price return quoted.
   • The MSCI ACWI ex-US Index captures large and mid-cap representation across 22 of 23 developed market countries (excluding the U.S.) and 27 emerging market countries.  The index covers approximately 85% of the global equity opportunity set outside the U.S. Price return quoted.
   • The MSCI Emerging Markets Index captures large and mid-cap segments in 26 emerging markets. Price return quoted (USD).

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