U.S. stocks just faced their worst quarterly decline in two years, but somehow it feels like a relief that stocks weren’t down even more. The SPDR S&P 500 ETF Trust (SPY)’s 4.6% decline during the first quarter of 2022 was its poorest showing since its 19.4% loss in the first quarter of 2020, a quarter in which stocks were ravaged during the early part of the COVID-19 pandemic.
While a 4.6% loss is nothing to cheer about in and of itself, it’s a big improvement from just a few weeks ago, when SPY was down more than 12% for the year. Stocks surged back during the second half of March despite continued concerns about rapid inflation, rising interest rates, spiking commodity prices and the Ukraine-Russia war.
None of those worries has gone away, making the comeback in SPY even more impressive (or confounding, depending on how you look at it).
Yet, as resilient as the broad stock market has been, that durability didn’t extend to all corners of financial markets. Fixed income, in particular, performed horribly during Q1. The iShares Core U.S. Aggregate Bond ETF (AGG) dropped 5.8% during the period as rates surged (bond prices and yields move inversely). It was the biggest quarterly loss for AGG on record and the biggest quarterly loss for the ETF’s underlying index in four decades.
Other notable fixed income losers during the quarter included the iShares 20+ Year Treasury Bond ETF (TLT), down 10.3%; the iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD), down 8.1%; and the SPDR Bloomberg High Yield Bond ETF (JNK), down 4.8%.
Disruptive Tech Pummeled
Hefty losses weren’t just contained to fixed income ETFs, either. While SPY and other broad stock market ETFs held up pretty well, pockets of the high-growth ETF universe crumbled.
The ARKK Innovation ETF (ARKK) was the…
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