Stocks and Bonds Close out 2022 on Sour Note

The Dow (-0.2%), NASDAQ (-0.3%), and S&P 500 (-0.1%) each lost for the week, month, and year.  On a similar note, taxable bonds lost about 0.7% for the week, and also exhibited losses for the month and year.  Meanwhile, tax-free municipal bonds exhibited a similar trend of losing about 0.3% for the week, suffering heavy losses for the year, but managed to eek out a small gain for December.

There was little economic news reported last week, so let’s discuss the carnage from a month and year that we would like to put behind us.  See the table below which represents the performance of the major US stock market indices, as well as the Barclays Aggregate Bond Index.

Index	Prior Week	Prior Month	Prior Year
DOW	-0.2%	-4.2%	-6.9%
NASDAQ	-0.3%	-8.7%	-32.5%
S&P 500	-0.1%	-5.8%	-18.1%
Bonds	-0.7%	-0.8%	-13.4%

Last year marked the 5th year since 1928 that the S&P 500 and the 10-Year Treasury have lost value in the same year, with prior occasions in 1931, 1941, 1969, 2018.  In each case, bonds went up the following year, and with the exception of 1932 (the Great Depression), stocks were also up the following year.  Last year also represented the 2nd worst year (1931) for the 60/40 (60% stocks and 40% 10-year Treasury bonds) portfolio over the same time period, as that “standard” portfolio lost 17.5% in 2022.  Note that the 10-Year Treasury index is not the same as the Barclay’s Aggregate Bond index, but their results are comparable.

So, I think we can all in agree that 2022 was a year we will all be glad to put behind us.  By no means are we suggesting that 2023 will be positive for either or both indices, but history is supportive of it.  First, the US and world need to avert or “survive” a sharp recession, and inflation needs to ease so that the Fed can pare back on its efforts to curb inflation by raising interest rates.  That might be a lot to ask for, but most economists believe that the second half of 2023 should be better than the first half.  I guess we will know at this time next year.

Have a great day, week, and a healthy and prosperous 2023.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.