Almost 4 months for stocks: The S&P 500 posted its worst start to a year since 1939. Here’s what the pros say you should do now.

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S&P 500 SPX broad market,
-3.63%
Friday closed down 13.3%, marking the ugliest four-month period to start a calendar year since 1939, when it fell 17.3% (see table).

Other major equity benchmarks don’t work any better. Technology-laden Nasdaq Composite Index Company,
-4.17%
It ended down 21.2%, which was the largest decline for the Nasdaq Composite Index since its introduction in 1971.

Dow Jones Industrial Average DJIA,
-2.77%
It closed 9.3% so far in 2022, which would be the worst start to a year for blue chips since the COVID pandemic in the US in 2020, when it fell 14.69%.

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Markets are retreating amid a series of issues and sentiment that have been shaky, with a key gauge of the overall health of the US economy, GDP, shrinks by 1.4% The annual rate in the first quarter, which was hampered by supply chain bottlenecks and a growing trade deficit, although consumer and business spending were bright spots.

In fact, the Personal Consumption Expenditure Index, or PCE, the Fed’s preferred metric for reading inflation, Seasonal rate rose 1.1% in March From the previous month, the Commerce Department said on Friday.

Concerns surrounding Russia’s invasion of neighboring Ukraine have amplified concern about the health of the global economy, as ongoing battles with COVID-19 continue to hobble parts of the world, particularly China.

Uncontrollable inflation and the Fed’s eagerness to stamp it out at higher interest rates have also been a recipe for fierce price swings.

paying off: Fed rate hike seen half a percentage point next week baked in a pie

However, there is some indication that inflation may be cooling. Overall inflation rose 6.6% in March from a year earlier, an acceleration from February, but the move represented a decline when food and energy costs were factored in, with a 5.2% rise last month from a year earlier, according to the government.

be seen: US inflation rises to 6.6% based on PCE index – but there is a positive side

It’s worth noting that bonds, traditionally seen as a haven for investors as stocks tumble, haven’t provided much comfort. iShares 20 + Year Treasury Bond ETF TLT,
-1.30%
It’s down 19.4% so far in 2022 as the 10-year Treasury yields TMUBMUSD10Y,
2.889%
It jumped fast close to 3%.

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Against this backdrop, is the outlook as bleak as it has been for the past four months?

Michael Antonelli, market strategist at Baird, said clients are following up on their orders sporadically amid the market turmoil.

“We keep reminding them that the world is a crazy place, and that there is almost never a time when the returns are high and the risks are low,” he said.

“We also reiterate the fact that holding stocks in a bull market is a practice, while holding them in tough times is the Super Bowl,” he said.

Market moments like this current downturn test investors’ resolve, said Art Hogan, chief market strategist at National Securities, citing Thomas Fuller’s 17th-century remark that it’s darker before dawn. “We’re going to make a show that we’re in or near that darkest place,” Hogan said.

There may be a glimmer of light, in Hogan’s view, as the market becomes more accustomed to the Fed’s plan. The Federal Open Market Committee is holding its two-day policy meeting next week, May 3-4, When interest rates are expected to rise significantly, which could lead to an increase in the benchmark federal funds rate, it is currently in a range of 0.50% to 0.75%, by half a percentage point or even more.

“Markets sold off in anticipation of the first rate hike from the Fed in March, only to rise about 10% after the announcement,” Hogan said.

“We wouldn’t be at all surprised if we saw a similar reaction after the May 4th call, in which the reality of Fed policy would replace the Fed’s policy narratives that were frightening the growth sector. Sell the rumor, buy the news,” the strategist said.

In terms of strategies, Hogan said in a research note on Friday, he recommends “a diversified equity allocation with an iron approach with growth exposure on one end and economically sensitive cyclical exposure on the other.”

Iron strategy refers to an investment approach whereby an investor invests across a risk spectrum ranging from higher risk to lower risk, in an effort to achieve a more balanced portfolio.

Will the environment be better for stocks next month? Who knows.

But feelings seem to be improving.

The Final Survey of US Consumer Sentiment In April it fell to 65.2, but that still represented the highest reading in three months and the first improvement so far this year.

That could mean more green shoots in May for parts of the economy. the most recent A report from the University of Michigan It reveals that Americans felt better about lower gasoline prices and were more optimistic about the future.