MARKET OVERVIEW

(As of close of 4th Quarter. 2022)

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.

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.