Listen in, while Michael C. Mashburn, SR, MBA, AIF®, a Senior Investment Consultant here at GrandView Financial Group, gives us our quarterly market update.
2022 was a year most of us would like to forget when it comes to the financial markets. In Q4 they exhibited strong performance for the DJIA, and the S&P 500 indices, but not the tech-heavy Nasdaq – and it wasn’t enough to overcome a disappointing year.
Normally, when stocks perform poorly, the bond market is a safe place to hide out. Not this past year. We saw inflation rise to over 9%. To combat it, the federal reserve aggressively raised short-term rates seven times, then added another 25 bps hike on February 1st.
All this caused the worst-ever year for US bonds, according to CNBC. Even for investment grade bonds -which are perceived as boring but safe, most of the time. The US aggregate bond index was up 1.87% in Q4, but for 2022 as a whole, lost more than 13%.
Did riskier high-yield bonds fare any better? They did grow by 4.17% in Q4 but also lost more than 11% for the year.
Is there any good news here? Well, many feel that the fed is about done.
And we did see some bright spots in Q4- The Dow Jones industrial average bounced back with a positive 16% return for the year – which is a historically strong performance, but it ended the year down nearly 7%. You could say The Dow was the best house in a bad neighborhood of investment choices for the most part.
The S&P 500 was up 7 and a half % in Q4 but down more than 18% for the year.
The Nasdaq composite index – which is half technology stocks, did not fare as well. It fell less than 1% in Q4, but for the year, lost 32 and a half %. Ouch.
Looking forward, here are some thoughts on the market heading into 2023:
- Historically, the stock market is up 3 out of every 4 years on average.
- Corporate earnings drive long-term stock market performance. So watch out for current earnings plus what companies expect for the future.
- Everyone is talking about the recession. The bond market is forecasting it, CEOs of our largest financial institutions are preparing for it, and Tech companies are laying off staff.
- The word recession is an open-ended term. They usually last for about 10 months – but the 2007-2009 recession lasted 18 months – and the Covid-19 recession was just 2 months.
- Bond yields are attractive again, making them an important part of a well-thought-out investment allocation.
The bottom line is – Investing is for the long term. There will be years where you lose money. It’s all part of the process. And helping you plan for a successful retirement with these ups and downs already factored in - is what we do.
James Baker, former Secretary of State is credited with the 5 Ps. “Proper preparation prevents poor performance.” At GrandView, we agree. Our goal is to help you plan for your future so you can enjoy your grand view of life.