The past two years provided a simple and compelling summary of the ongoing behavior of the equity markets. During 2022, the three major indexes of U.S. large companies (the Dow, the S&P 500, and the Nasdaq 100) each experienced declines between 21% and 35% as measured from its highest point to its lowest point.
After a strong start to the first half of the year, equity markets pulled back in the third quarter of 2023. At the same time, bond prices continued to fall due to rising interest rates, which were prompted by stronger-than-expected economic data.
We are even more delighted than usual to write to you regarding the events of the last six months, and on the further progress of the long-term plan on which we are working together.
During the first quarter, the S&P 500 gained 7.5% and has recovered more than 14% from the most recent low in October of 2022. As you know, the S&P 500 index is not our only indicator of stock market performance, but it is a useful measuring stick at times.
Each time the calendar jumps from one year to another, we stop to reflect on where we are, how we got here, and where we are going from this point. As we reflect, we want to take this opportunity to reinforce some of our enduring principles, which we consider a foundation to our shared success both in the present and in the future.
Both the equity and bond markets continued to struggle through the third quarter of 2022. The first half of the quarter experienced positive returns before falling to new recent lows during September. Though no “official” recession has been declared by the National Bureau of Economic Research, it is likely we are in the midst of one.
The S&P 500 Index suffered its worst performance during the first half of a year since 1970, declining almost 17% during the second quarter, bringing the total decline during the first six months to more than 20%. Beyond the primary index of the largest U.S. companies, essentially all segments of the investment universe performed similarly and were down for the first half.
As the first quarter concluded, we found ourselves engrossed in yet another global crisis. Confronting supply chain issues, inflation, and bitterly partisan politics would have been more than enough to deal with, especially after trudging through the ongoing effects of a multi-year pandemic. However, the conflict between Russia and Ukraine is heavy on our hearts and minds.
As we reflect on 2021, we are ever more grateful to be working with you and mindful of your continued trust in us. After another year of economic challenges and continuing to navigate the COVID-19 pandemic, we are encouraged by the economic growth and performance of the market in 2021, which reinforces that a strategy of persistence and discipline is rewarded over the long-term. As we enter 2022, we are compelled to restate some of the core beliefs and practices on which we focus.
During the third quarter of 2021 the U.S. stock market, generally speaking, showed reasonable gains during the first two months of the quarter before surrendering those gains in September to finish the quarter relatively flat. After outperforming larger companies during the most recent recovery since March 2020, smaller companies retreated some during the third quarter with the primary mid cap and small cap indexes experiencing negative returns during the third quarter.
In the first half of 2021, as the world continued to recover from the COVID-19 pandemic, the economy and the equity markets made significant progress. The economy's continued dramatic recovery was spurred by (1) the proliferation of effective vaccines against COVID-19 and the retreat of the pandemic, (2) massive monetary and fiscal accommodation, and (3) its own deep fundamental resilience, which should never be underestimated.
March 23 marked the first anniversary of the low point in the market brought by the pandemic. On that date in 2020, the S&P 500 fell below 2,200 before closing at 2,237.40. Thirteen months later, it is over 4,150. Many investors wanted to sell last year when the market and the value of their portfolio fell so rapidly, and a great number of them did. With just a few statistically inevitable exceptions, our clients did not, even though they probably wanted to....
Occasionally, there comes a year in the economy and the markets that may serve as a tutorial in the principles of successful long-term, goal-focused investing. We believe 2020 was definitely one of those years. This past New Year's Eve, the S&P 500 Index closed more than 16% higher than where it was a year earlier on December 31, 2019. From that single measurement, which certainly is not conclusive to the success or failure of the market, you might infer that the equity market...
The conronavirus is still very much with us, as is much of the economic dislocation generated by the resulting lockdowns and protective measures. Granted, there is news that we are closing in on a vaccine--and possibly several vaccines. However, it may take considerable time before it is widely distributed. Moreover, in the coming weeks, we will go through a hyper-partisan presidential election, with a variety of voting issues we have never had to deal with before.
The first six months of 2020 saw the advent of the worst global public health crisis in a century-since the 1918 influenza pandemic. In response, the world locked down, putting its economy into, in essence, a medically induced coma. In this country, the immediate effects were (1) a savage and nearly instantaneous economic recession accompanied by record unemployment, and (2) the fastest, deepest collapse in stock prices in living memory, if not ever.
The first quarter of 2020 was memorable, to say the least. I believe we can all agree that 2020 will be unforgettable for many reasons. Though the spread of the COVID-19 coronavirus continues to influence life around the globe, it is evident that the world continues to adapt to doing things in a different way. Throughout this pandemic, our first thoughts and prayers are directed toward the healthy and safety of our loved ones and our community, near and far.