May 2, 2022

Market Update


With ~69% of S&P 500 companies having reported (through Thursday of last week), Q1 earnings had grown by more than 10%.

 In April, the DJIA was down 4.9%, S&P 500 was down 8.8%, and Nasdaq dropped 13.3%. These were the biggest monthly declines since March 2020 for the DJIA and S&P, and the largest for the Nasdaq since Oct. 2008. This was the second stock market correction of 2022.


  • During April, 79% of the S&P 500 declined, with 144 down at least 10%.
  • We are encountering the worst inflation in 40 years.
  • Fed is expected to start aggressive tightening. We expect 50-bp moves at the next three meetings and an aggressive unwinding plan will be announced on Wednesday.


The GDP dropped at an annualized rate of 1.4% in Q1. GDP was impacted by a surge in imports that had been delayed by the backup at docks, a slowing in inventories, and shrinking government spending at the end of the massive stimulus last year.

The positive outlook: consumer spending rose 2.7% -- the highest in three quarters. Business investment jumped 7.3%, the biggest increase in a year.


  • Q1 employment cost index rose 1.4% QoQ, largest increase ever
  • The savings rate fell to 6.2%, the lowest since 2013
  • Consumer debt is 77% of GDP, well below the 100% seen in 2008

Student Debt

President Biden is expected to make an announcement in the near future about forgiving some
student debt. About 40MM people owe ~$1.6T in federal student debt, which makes up ~90% of
student debt outstanding. Biden has argued that people who attend expensive private schools and
graduate programs shouldn’t receive the same amount of relief as students who attend public
universities. Relief may only be granted to lower-income to middle-income families and

Forgiving up to $50K in student debt per borrower would cost $904B and would forgive the full balance for 79% of the 37.9MM federal borrowers. Adding a household income limit of $75K would cut the total cost to $507B and having that same limit but forgiving a max of $10K per borrower would cost $182B.