Federal Reserve Bank interest rate policy continued to have a disproportionate impact on the U.S. stock market over the final quarter of 2023.
The second quarter of 2022 was a difficult period for both stocks and bonds as the Federal Reserve, faced with unacceptable high inflation reports, lifted interest rates in June by 75 basis points. This was the highest rate increase implemented since 1994. The credit markets anticipate another 75 basis point increase later this month.
The U.S. financial markets were quite weak in the first quarter, with broad-based stock and bond indexes down roughly 5% and 6% respectively during the period. April saw an acceleration of the equity market decline, with the S&P 500 index and NASDAQ composite index down 8.7% and 13.2% respectively for the month.
Analysts believe the weakness in both stocks and bonds during the first quarter of 2022 was primarily due to investor concerns regarding inflation.