Marshall Commentary

We understand that financial planning isn’t always top of mind – but it is for us! Each month we publish a commentary to update you on the latest financial trends and changes.

Wealth IQ – April 2022

by Adam Reinert, George Evans II, & Sean Dann | April 29, 2022 | Commentary

Marshall Wealth IQ is aimed at sharing insightful financial market and economic data in easy to visualize charts with brief analyses. This commentary isn’t designed as a call to investment action, but rather as a dependable source to help you feel better informed about current events in today’s market and the underlying trends impacting current wealth.

Let’s get started:

1) 2021 felt euphoric for capital markets. In 2022, that euphoria has been replaced with what feels like fear for stocks and panic for bonds. The chart below highlights year-to-date returns for stock indices (green lines) and bond indices (blue lines). Put simply, it has been a rough start to the year for almost every asset class, with the returns between ‘risk assets’ (stocks) and ‘safe assets’ (bonds) almost indistinguishable from each other.

2) So what changed? While there are many factors that have weighed on investor sentiment in 2022, including the war in Ukraine and inflation, one of the largest has been the expected pace of interest rate increases by the Federal Reserve. In January 2022, market expectations suggested the Federal Reserve would raise interest rates a few times over the course of the year, ending with a fairly benign Fed Funds rate between 1.00% and 1.25%. However, over the last four months, expectations have changed rapidly, with market expectations now calling for a year-end Fed Funds rate between 2.75% and 3.00%.

Source: Bloomberg, L.P.

3) The pace and level of interest rate changes are important as they impact many areas of the economy such as borrowing costs, spending, company profitability and, in turn, overall economic activity. One of the borrowing costs consumers see most directly is their mortgage rates. The interest rate on a 30-year mortgage has risen by nearly two full percentage points since the start of the year, sitting at a 10-year high and surpassing highs from the last Fed tightening cycle in 2018. An individual purchasing a home with a $500,000 mortgage can expect to pay over $500 more in their monthly payment today vs. in January as a result of this change in mortgage interest rates.

4) For businesses, rising interest rates generally impact valuations as their cost of capital rises. This, combined with the impact of rising borrowing costs (such as higher interest on credit cards), can negatively impact consumer spending and, in turn, business profitability. Stock market indices have fallen to begin 2022 as financial markets quickly adjusted to rapidly rising interest rate expectations. Thus far, stock market performance, while volatile, has been fairly normal as the market adjusts to this new rate paradigm.

5) Less normal are the moves we’ve seen in fixed income markets. Rapid market adjustments resulting from changes in the expected path of interest rates increases from the Federal Reserve have caused near historic drawdowns in the Barclays Aggregate Bond Index, a broad measure of investment-grade bonds. This is because as interest rates rise (or are expected to rise), bonds with lower yields become less attractive in the higher rate environment. The line chart below represents rolling 1-year returns for the index, and the green shaded area represents a ‘normal’1 variance range for those returns.

6) Bonds are typically considered a stabilizer for diversified portfolios, and while their current performance may come as a disappointment to many investors, it should not be a reason to spurn the asset class. The table below looks at how bonds behaved after the large drawdown periods referenced on the prior page. The good news is that bond returns in these subsequent periods were generally positive. It’s important to remember that unless a bond defaults, it generally returns the original principal back to the purchaser at expiration.

7) While disappointing, the sizeable drawdowns observed in fixed income markets this year have provided some positive developments for bond investors. Yields for both investment grade corporate bonds (top graph) and BB-rated high yield bonds (bottom graph) have started to return toward their average yields since 2000. Higher yields should be welcome news for longer-term investors.

8) For savers, short-term treasury rates have also started to move higher, providing the potential to earn a higher level of interest on cash deposits in the future. The yield paid by money markets tends to track these short-term treasury rates, albeit with some lag.

9) Lastly, there has been a lot made of the brief yield curve inversion in the 10-2 spread. A yield curve inversion is the scenario where short-term interest rates exceed longer-term interest rates. Many consider an inversion to be a predictor of recession as tightening financial conditions cool an overheating economy. While this economic indicator bears watching and should not be completely discounted, the ‘COVID’ business cycle has been somewhat unusual, with many metrics hitting different levels of extremes. Because of this, a combination of data points is likely more prudent for assessing economic activity.

It’s impossible for anyone to know with certainty what will happen today, tomorrow, or even a minute from now. Investment involves risk and volatility; it’s why long-term investors have historically been rewarded with excess returns relative to cash. Our investment department monitors market data and works with our wealth advisory teams to right-size portfolios should something change relative to long-term trends. In the meantime, we’ll continue to share financial and economic data we believe is insightful and relevant to your wealth to help you feel informed.

Thank you for reading; please be well and stay healthy.

Adam Reinert, CFA, CFP®

Chief Investment Officer

George Evans II, MBA

Chief Investment Strategist 

Sean Dann

Research Analyst


Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania.   This newsletter is limited to the dissemination of general information pertaining to Marshall Financial Group’s investment advisory services.  Investing involves risk, including risk of loss.  References to market indices are included for informational purposes only as it is not possible to directly invest in an index. The historical performance results of an index do not reflect the deduction of transaction, custodial, and management fees, which would decrease performance results. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any comparative benchmark index.

This newsletter contains certain forward‐looking statements (which may be signaled by words such as “believe,” “expect” or “anticipate”) which indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward‐looking statements. As such, there is no guarantee that the views and opinions expressed in this letter will come to pass. Additionally, this newsletter contains information derived from third party sources. Although we believe these sources to be reliable, we make no representations as to the accuracy of any information prepared by any unaffiliated third party incorporated herein, and take no responsibility, therefore.

For additional information about Marshall Financial, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure web site (  Please read the disclosure statement carefully.