Take a look at last week’s market recap from Joe Gallemore, CIMA® Partner & Director of Investment Management for Argent Bridge Advisors. Watch the video now!
Indexes enjoyed another week of modest recovery. Most stock indexes recovered +1-1.5% last week. The MSCI Emerging Markets index rose an impressive 3.5% driven mostly by a rally in the Chinese market. Bonds also recovered another 1.5% as the Fed signaled it will start decreasing the size of interest rate hikes.
So where does that leave us with 18.5 trading days left in 2022?
- Well, the S&P 500 is -13.3%. Unless we see a really strong rally, only made possible by a complete reversal of the Fed, an unconditional withdraw by Russia, and an eradication of Covid in China, we’re likely going to end the year in the red. While disappointing, this shouldn’t be far-fetched or even surprising. Since 1980 we’ve seen a negative year for the S&P 500 an average of every 4 years. And the previous 3 years have produced strong double-digit returns.
- The Bloomberg US Aggregate Bond Index stands at -11.4%. It’s been a truly historic year by a large margin. The double whammy of very high inflation and aggressive rate hikes are just too strong for bond prices to fight against. The good news is that bond prices are reflexive and should recover as interest rates peak and eventually slowly lower. (for actual bond holders, these are just paper losses)
What ABA is doing to wrap up the year
- Tax loss harvesting
- Strategically avoiding capital gains from mutual funds
- Rebalancing portfolios
- Looking for opportunities like Roth IRA conversions
- Making sure all year-end gifting is completed!
Focusing ahead to 2023 – we’re experiencing the headwinds right now, and hopefully, 2023 is a year of change in this respect.
- Reasonably good chance that a recession is declared in the US. BUT, the stock market is not the economy! And historically the market starts recovering first.
- Fed expected to reach a pausing-level of interest rates in 2023. This should boost both stocks and bonds. And ideally, this comes about because inflation has started declining, which will be a positive force for bond prices as well.
- Hopefully, global issues, primarily the war in Ukraine and shutdowns in China, will progress a long way toward resolving themselves.