2022 - A Year Like No Other

2022 - A Year Like No Other

2022 was a year characterized by abysmal returns for both stocks and bonds.  Large company stocks, represented by the S&P 500 fell nearly 20% for the year.  Small stocks (Russell 2000 index) fared slightly worse.  Technology and growth stocks, which had powered these indices higher over the past several years, declined even more severely than these indices.  Fixed income returns - which usually cushion the blow of equity declines - provided no support.  The broadest measures of the bond market declined nearly 13%, their worst performance since the creation of these indices in 1976.  The previous worst was in 1994 when returns were -2.9%!!! 

The pivot of central bankers from the viewpoint of transitory price increases to enduring inflation that must be stamped out led to an unprecedented year of monetary tightening.  Globally, central banks raised interest rates in unison - from unprecedented lows in 2022.  The substantially higher interest rates have reintroduced a positive cost of capital into markets resulting in significant declines across all financial asset classes.  The worst losses occurred in holdings that had been priced for an environment of permanently low-interest rates.

Looking forward, we believe the magnitude of the change in global interest rates cannot be overstated and will require a period of digestion – at home and abroad.  There likely will be more bumps in the road.  The declines in all asset prices experienced in 2022 have resulted in a more forgiving setup for investors going forward.  Markets will continue to adjust, and global economic growth and prosperity will return.

As expected, the Federal Reserve raised interest rates by 0.25% at their meeting Wednesday, March 16th.  The median dot plot, the forward view of rate increases projected by policymakers, now expects six additional hikes in 2022 and 3-4 in 2023,…
On Friday, February 04, 2022, the Labor Department reported that the U.S. economy added 467,000 jobs in January.  This far exceeded expectations of near-zero additional jobs.  The unemployment rate increased to 4% from 3.9%, indicating more people…
During the Federal Reserve (Fed) meeting on Wednesday, January 26, the Fed set expectations for a March 2022 interest rate increase.  The Fed highlighted the strong labor market and inflation levels that are well above targets as reasons to begin…
On Wednesday, December 15, the Federal Reserve (Fed) announced it will accelerate the pace (tapering) of its monthly bond purchases.  In November, the Fed announced it would begin reducing its purchases of Treasury bonds by $10 billion per month and…
On Wednesday, November 3, the Federal Reserve (Fed) announced it would begin slowing the pace (tapering) of its monthly bond purchases. Currently, the Fed is purchasing $120 billion a month of securities split between Treasury bonds ($80 billion)…
The upward trend in economically sensitive stocks paused during the third quarter.  The market has had to come to grips with a resurgence in COVID-19 via the delta variant, uncertainty emanating from Washington D.C. surrounding fiscal spending and…