Broker Check

Fourth Quarter 2022

We ushered in 2022 with a bang and high hopes as the S&P 500 reached record highs on January 3, 2022. Thereafter, inflation persisted, and the stock and bond market simultaneously declined. The markets took another hit after Russia invaded Ukraine and again after the Federal Reserve began hiking interest rates to combat inflation. The market remained highly volatile throughout the year, entering Bear Market territory more than once.

Bear Markets are commonly defined as a 20% drop from a record close, but not all bear markets are alike. Event Driven Bear Markets are triggered by one-off shocks, like COVID or the Financial Crisis. Cyclical Bear Markets are triggered by a shrinking economy, elevated interest rates, and recession fears. Structural Bear Markets are triggered by structural imbalances in the system. While COVID may have been the catalyst event, relentless uncertainty introduced cyclical risk as well. As we move into 2023, much of the focus will remain on inflation concerns, rate hikes, and geopolitical risk.

All of this has caused a drag on the economy, not just here in the U.S. but worldwide. Global markets may be challenged as tighter financial conditions drive volatility. However, tighter financial conditions are necessary to tame inflation around the world. The U.S. market is signaling low economic growth and a higher likelihood of a recession. However, a recession, if any, is expected to be mild in nature.

As you review your year-end returns, keep in mind the market has priced in most of this bad news already. History has shown us that the best and worst market days are usually clustered together, and the markets start to recover before the economy does. As a result, we have learned that waiting on the sidelines for an economic turnaround to happen in real time is not the best strategy. On average, time in the market pays off more than trying to ”time the market.”

Market momentum will continue to be the driving force that investors must reckon with in the coming year. It’s best to be prepared. Let’s review all your financial goals (including your cash needs) and make sure they are aligned with your risk tolerance and portfolio composition. If there have been any changes to your financial circumstances, goals, or objectives, please contact us right away. The value of our advisory services is enhanced when we are actively working together with you to keep your financial house in order.

In closing, we would like to thank you for your trust and confidence following a very difficult year.  We value our working relationship, which is why we are committed to a service model that puts our client’s needs first.  We hope you had a wonderful holiday season and a happy new year.