(As of close of 4th Quarter. 2022)

Unemployment Back to Pre-Pandemic Levels

Stubborn Inflation Starts To Fall​

Oil Prices Declining Despite Tension in Europe

Market Recap

  • Both U.S. and international equities rebounded in the final quarter of the year, with all major indices posting positive returns;
  • However, the S&P500 posted its worst year since 2008, losing 18.11% during 2022 vs a 14.35% loss in international equities during the same time;
  • Fixed income also posted heavy losses on the year, with both the US Aggregate Bond Index and Gov/Credit Bond Index posting losses in excess of 13%;
  • The Federal Reserve raised interest rates by an additional 50 bps in December, a step back from three consecutive 75 bps raises; a sign that inflation may be slowing.

Market Outlook

  • While equities rose in the final quarter of 2022, markets are still expected to be volatile going into the new year due to the chance of a pending recession and stubborn inflation;
  • We now believe that the Federal Reserve will begin to slow down their aggressive interest rate hikes, forecasting a hike of 25 or 50 bps in their February meeting;
  • We believe that the labor market will continue to remain tight; while wages remain high, demand greatly exceeds supply;
  • With an inverted yield curve and yields at or near a cyclical peak, we feel it is unnecessary to be overly aggressive when seeking sufficient yields;
  • Mortgage-backed securities (MBS) and other securitized products appear less attractive due to lowered demand and a rising interest rate environment.