January 3 2023

Equities End 2022 on a Negative Note

Equity markets fell slightly for the last trading week of the year. Global equities (represented by the MSCI All Country World Index) were down -0.03%, and domestic stocks (represented by the S&P 500 Index) were down -0.11%.

2022 continued to prove to be an anomaly in markets as there seemed to be nowhere to hide from negative returns. The usual stability and diversification properties of bonds did not hold up as rising rates continued to push bond prices lower. According to Schwab, there have been only thirteen 12-month periods where stocks and bonds both posted negative returns since 1976, which would equate to only 2.4% of the time. In 2022, both equities and fixed income (represented by the Bloomberg US Aggregate Bond Index) finished down double-digits on a total return basis.

The shortened holiday week was relatively quiet on economic data releases. Weekly jobless claims rose slightly to 225,000 from 216,000 the week prior, but they are still down from the 2022 peak of 261,000 in July.

The first week of 2023 will come with economic reports on manufacturing, jobs and unemployment, and the release of the Fed’s December meeting minutes. Following a rough year for markets, the overarching worry among investors continues to be inflation and how the Fed’s tightening policy will affect economic growth and the strong labor market.

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.

Mike Horwath

Mike heads the internal Investment Committee that is responsible for the investment direction of the firm. He works closely with Diversified’s financial planners to support the investment side of the lifelong financial planning process. Lastly, it’s Mike’s responsibility to oversee the ever-changing global investment landscape and work with the planners to evaluate the impact on each of our client’s strategies.

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Equities End 2022 on a Negative Note