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After the significant decline in price over the last 6 months, it may appear that the market is now a 'bargain'. The forward P/E (10-yr average 2009 – 2019 Price/Earnings Ratio) of the S&P 500 at a price of $4000 and EPS (Earnings Per Share) of $237.18 is 16.9. This is below the 5-year average (18) and equal to the 10-year average (16.90). However, the 5 and 10-year averages are heavily skewed by the pandemic surge in forward multiples which rose to over 23 in the back half of 2020 as investors, flush with stimulus cash and backed by historically accommodative monetary policy, bid up stock prices to historic levels.

Stock Markets have nearly erased the gains of 2021 as inflation persists and a war rages on in Ukraine. Tune into the May 2022 edition of Pacific Wealth Management's Proactive Asset Management Webinar to learn about why markets are so challenging this year, and how PWM is navigating the investment landscape.

The first four months of 2022 have been challenging for most investors as stocks and bonds have simultaneously declined this year. The U. S. Federal Reserve Bank is now actively unwinding its unprecedented monetary and fiscal stimulus response to the pandemic. COVID-19’s impact on our lifestyles, along with $Trillions of stimulus, has precipitated the highest inflation we have seen in 40 years.

The year 2022 began with financial market volatility we haven’t experienced since COVID burst onto our consciousness in early 2020. The uncertainties that inspired this volatility primarily surrounded the pace of our U.S. Federal Reserve bank unwinding their outsized fiscal and monetary policy response to the pandemic. Those uncertainties remain and have now converged with the conflagration in Ukraine. Our thoughts and prayers are with the Ukrainians and the entire region.

The ongoing pandemic and trillions of stimulus dollars governments injected into economies to support businesses and consumers have created many dislocations that will take time to work through. Supply-chain bottlenecks, labor shortages, and pent-up demand are creating inflation at levels we have not seen in 40 years. Today this inflation is more of a concern to the average investor than COVID. Although we expect the pace of economic growth to slow because of these dislocations, we remain optimistic our American economy will continue expanding in the new year.

ESG stands for Environmental, Social & Governance. ESG funds originated from investors’ desire to align their values with their investing. They wanted to be socially conscious with their money, supporting ethical behavior and social causes important to them, without sacrificing returns. They also wanted some standardization and for a third party to do the vetting for them. The ESG criteria and designation allow investors to evaluate investment opportunities based on not only the financial data but also on what many consider to be moral grounds.