Madison Client Communication | 3Q 2022


The third quarter saw a continuation of the unsettled and rapidly evolving global economic landscape that has characterized 2022. Seemingly working together to wreak havoc, the usual suspects of higher interest rates, inflation, the war in Ukraine, lockdowns in China, and supply chain issues continue to be headwinds for financial markets in 2022. In its attempt to combat the most significant surge in inflation measures since the early 1980s, the Federal Reserve (Fed) raised the Fed Funds rate another 75 basis points (bps) in both July and September. While we are beginning to see the effects of tighter monetary conditions via a slowdown in economic activity, it is likely too early to expect changes in Fed policy in the near term.

Equity markets continued to struggle during the third quarter, with the S&P 500 moving down another -4.9% to bring the full year-to-date decline to -23.9%. Fixed income markets have also come under intense selling pressure with interest rates rising markedly throughout 2022. The Bloomberg U.S. Aggregate Bond Index has declined a stunning 14.6% so far this year, though investors looking for a silver lining will point to the 4.8% yield, compared to 1.8% at the end of 2021.

Time will tell if central bank policies can bring a sense of calm to markets. For now, given the abundance of uncertainty, we think the choppiness is likely to persist.