Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

U.S. And Global ETFs: All Fall Down

Published 01/24/2022, 03:07 AM
Updated 07/09/2023, 06:31 AM

This article was first published at The Humble Dollar

The S&P 500 just had its worst week since March 2020’s COVID-19 crash. Ironically, the decline happened as coronavirus cases were finally dropping after the December surge. Vanguard's S&P 500 ETF (NYSE:VOO) fell 5.7%, while the Vanguard Small-Cap ETF (NYSE:VB) lost 7.3%.

Returns were not as bad overseas. The Vanguard FTSE All-World ex-U.S. ETF (NYSE:VEU) dropped 3.1%. Coming as a surprise to some index fund investors, Vanguard FTSE Emerging Markets ETF (NYSE:VWO) is actually positive so far in 2022. Investors who hold a globally diversified portfolio have benefited this month as international stocks have missed the brunt of the selling pressure.

The bond market was down slightly last week after a surge in interest rates to kick off the year. The 10-year Treasury note neared 1.9% on Tuesday before settling just shy of 1.75% on Friday. Traders flocked to the safety of Treasurys as the stock selloff worsened over the second half of the week.

I noticed that the yield to maturity—a measure of a bond’s current interest rate—jumped to 2.1% on iShares Core U.S. Aggregate Bond ETF (NYSE:AGG). Suddenly, bonds don’t seem like such a raw deal. In mid-2020, when the 10-year Treasury rate was just 0.6%, the yield to maturity on the U.S. aggregate bond index was less than 1%.

Still, inflation expectations over the next decade are near 2.3%, while the market sees consumer prices climbing 2.7% a year over the next five years. You can grab Series I savings bonds at 7.12% through April, but that rate will retreat later this year and beyond, assuming inflation eases.

Buckle up for continued wild market moves. The Volatility Index (VIX) rose to nearly 30 last Friday, the highest since early December. There’s a Federal Reserve rate decision coming on Wednesday. The market currently expects five quarter-point interest rate hikes by year-end. This is the common reason cited for the sharp pullback in growth stocks recently.

It’s always helpful to remember that corrections happen frequently in the stock market. The S&P 500 drops 14% during an average year. Last year was an odd one: The S&P 500’s biggest drawdown—a price decline from peak to trough—was just 5.2%. The current selloff from 2022’s lone S&P 500 all-time high on Jan. 3 is already 8.3%.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.