Prevailing Pessimism Masks Market Resilience

Markets may have already priced in many of investors' biggest concerns.

The nature of the economy is that there are always causes for concern in strong markets, just as there are reasons for optimism in weaker ones. It’s fair to say, however, that April made it easier to find the concern than the optimism. Still, the headwinds faced so far in 2022 represent discomfort masking long-term opportunity and a fundamentally tenacious economy.

“While the markets have been focused on the negative, they have ignored the resiliency the economy is showing,” said Raymond James Chief Investment Officer Larry Adam.

That said, it’s wise to acknowledge the prevailing pessimisms:

  • The U.S. gross domestic product (GDP) fell at a 1.4% annual rate in the first quarter.
  • Inflation remains high, with the Consumer Price Index rising 8.5% over the year ending in March.
  • China’s ongoing COVID-19 lockdowns are contributing to supply chain challenges.
  • The Russia-Ukraine war will likely continue to cause difficulties.
  • Each headline market index was down for the month, with the S&P 500 having its worst day, April 26, since March 2020, falling 2.81%.

A forward-looking view recognizes that at some point we will be able to look back at where we crossed the peak of these difficulties. For some of these issues, there is evidence to suggest that will come soon. The end of this year may look vastly different than its beginning. Here’s why: