1st Quarter 2022 MARKET COMMENTARY

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Global investment markets were mostly lower in the 1st quarter of 2022, as both stocks and bonds experienced a rocky start to the year following a very strong 2021.  Stocks and bonds trading lower in the same quarter is not common, as typically when the market is “risk off” and stocks move lower, bonds tend to appreciate and help offset negative stock returns.  The reason both were lower in the quarter was interest rates moved higher across the globe which negatively hit both bond and stock allocations.  One bright spot for investors in the first quarter was commodities. This is highlighted through the NERT model allocations holding PIMCO Commodity Real Return Fund, which was up 24.4% for the quarter.

As highlighted in previous commentaries, the Federal Reserve and other global central banks will continue to be the focus of investors globally in 2022.  So far this year, the Federal Reserve has raised the Fed Funds rate by 25 basis points (0.25%), but the current expectation is an additional 10 rate hikes over 2022 and 2023, moving the Fed Funds rate to 2.75% by the end of 2023.  The goal of this is again is to reduce the heavy inflation, as the inflation rate in the US, measured by the Consumer Price Index (CPI), rose by 8.5% in March compared to one year prior.  Surging prices in food, energy and shelter were big contributors to the increase. The goal for the Fed is a “soft landing”, meaning that they reduce inflation and also avoid sending the economy into a recession in the process.  The success of a soft landing will be a major factor on investment market returns for 2022.

    1st QTR             1 YR                          3YRS                   5YRS

Stable Income                                    -3.06%                 1.91%                      4.86%                4.29%

Conservative Income                         -3.75%                3.51%                      6.95%               6.06%

Traditional Pension                            -5.29%                 5.51%                   10.81%               9.43%

Equity Oriented                                  -4.51%                 10.42%                   14.34%            12.17%

NERT Model Allocation – Choices for every investor

The NERT model allocations are designed to help participants build diversified allocations to capture the major market sectors and a variety of management styles. They are offered to aid typical participant needs for diversified, risk-adjusted allocations. NERT rebalances allocations on a regular basis attempting to keep a consistent risk and asset posture. The allocations will maintain some exposure even in underperforming classes. Diversification, by definition, means not all assets can have positive performance every period. The NERT model allocations are designed to allow any investor to participate in proven ways to reduce risk and improve returns over longer periods.

In August of 2021 distribution restrictions implemented on the Principal U.S. Property Account (“Principal”) resulted in an immediate change to our model asset allocations. NERT has witnessed that full function has returned to Principal. As a result, our model allocations will be changing on July 1st 2022 to re-include Principal. You should receive a separate notice regarding this change, however in the event you do not, please feel to request a duplicate of the letter via our inquiries mail box: Info@NERT.com

Andrew Casteel, CIO, CFP

Acorn Financial Advisory Services, Inc.