2022 Q4 Commentary

Market Review

Despite equity markets posting positive returns in the fourth quarter, the year 2022 will be remembered as one of the most difficult for many investors. After three straight years of double-digit positive returns for U.S. equities, the year began with equity valuations perched at above average levels. While overall corporate earnings for the full year were reported relatively inline with investor expectations, stock prices were battered by a combination of higher inflation, interest rate increases, supply chain challenges, labor market shortages, and geopolitical event.

And it was not only stocks that felt the impact of the changing dynamics. Investors were left with no place to hide as most major asset classes, including bonds, dropped more than -10% over the course of the year. The Federal Reserve increased short-term interest rates seven times in 2022, with three consecutive hikes of 0.75% during the summer, to its current target of 4.25- 4.50%. Inflation has remained stubbornly higher than the central bank’s target of 2.5% per year. The traditional 60/40 equity/ bond portfolio suffered its worst return in more than 50 years.