Following up on yesterday’s post about the recent market declines, I thought it would make sense to talk not just about the declines themselves (where they came from and where they are going), but also about what the declines mean from a larger portfolio perspective. To take the emotion out of it for a bit, and see what the larger picture can tell us.

The economy seems to be doing well, with job growth still at high levels, consumer spending still healthy, and businesses continuing to invest. But the stock market—which is supposedly a barometer of that economy—is acting very differently. The market has fallen significantly from its peak at the start of the year and, more recently, has taken a sharper drop. What’s going on here, and will it continue?

Today’s post will be short, as tomorrow is a holiday leading into a long weekend—and next week is vacation! I have to admit, I am ready to get out of the office for a week. As much as I love Commonwealth and Massachusetts, a warm week at the beach isn’t bad either. Add in a chance to see my parents for Easter, and I’m very glad to be heading out.

Following up on yesterday’s piece on inflation, I wanted to dig deeper into another topic I’ve been hearing about recently: stagflation. When people look at inflation and the fears of slower growth, the idea of stagflation comes back to life from the 1970s and 1980s. But that was a long time ago when few of us were paying attention to economics. So it’s worth going back to basics and thinking about what stagflation is before we start to worry too much.

The most recent inflation data came in this morning, with the Consumer Price Index (CPI) up sharply again. The headline index was up by 1.2 percent for the month and by 8.5 percent for the year (a 40-year high). On the face of it, inflation is approaching a crisis. What if it keeps on rising?

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

Markets rebounded in March, but it was not enough to offset earlier losses in January and February. The S&P 500 gained 3.71 percent in March, while the Dow Jones Industrial Average (DJIA) rose by 2.49 percent and the Nasdaq Composite increased by 3.48 percent. But the selloffs in January and February caused all three indices to end the quarter in negative territory. Despite the March gains, the S&P 500 lost 4.60 percent for the quarter, while the DJIA dropped 4.10 percent and the technology-heavy Nasdaq dropped 8.95 percent. The market decline to start the year is a reminder that risks remain that should be monitored going forward.

The most recent news bomb taking markets down was the release of the minutes from last month’s meeting of the Fed. The Fed raised rates, as was amply reported. In the following press conference, Fed Chair Jerome Powell was widely reported to be more hawkish, which is to say, likely to raise rates further. But what we did not know until yesterday was just how emphatic the decision was for the entire committee.

My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Economic Risk Factor Update. Thanks for the assist, Sam!

We saw a bit of a bounce in stock markets in March, but not enough to recover from a terrible first quarter. U.S. markets were up between 2 percent and 4 percent for the month, and developed markets managed to squeak out a small gain, but everything else was down from 1 percent to 3 percent. For the quarter, markets were down between 3 percent and 8 percent, with blue-chip companies doing best and tech stocks getting hit the hardest.

We saw a bounce in stock markets for March, but everything was down between 3 percent and 8 percent for the first quarter. The reasons for this were twofold. First, with inflation at a 40-year high, the Fed was forced to raise interest rates. Second, the Russian invasion of Ukraine unsettled markets. Still, there were some positives. Hiring was strong, and business confidence and investment were healthy.