Good Afternoon,
I hope you had a pleasant holiday season and were able to celebrate with your friends and family.
This past year was full of events. We started off the year with launching the James Webb Space Telescope to orbit the sun. The 2022 Beijing Winter Olympics went off without a hitch with no need to delay unlike the 2020 Summer Olympic Games. On February 24, 2022, the world woke up to the saddened news that Russia had invaded Ukraine and the conflict has not yet come to an end. Queen Elizabeth II passed away after England swore in a new Prime Minister, making her the shortest serving Prime Minister in British history. Twitter got a new owner after months of negotiation, who is none other than Tesla CEO Elon Musk. We closed out the year with the U.S. qualifying for the World Cup in Qatar, with Argentina taking home the win.
We said goodbye to many this year, including Queen Elizabeth II of England – the longest reigning monarch in the UK, actress Olivia Newton-John, Brazilian soccer star Pele, Legendary News Anchor Barbara Walters and Pope Benedict XVI on the last day of the year. These are just a few who passed in 2022 but there are many more to be remembered. Many lives were also lost in Ukraine, and we continue to pray for everyone affected by this war.
2022 was a year filled with many highs and lows. Investor’s reactions to these fluctuations varied, as some saw them as opportunities, while others viewed them as challenges. A number of factors contributed to these fluctuations, some came through stock prices, others due to interest rates, but the biggest driver through 2022 was surely the prices of everyday goods. The year started on a high point as a result of the strong market rally from 2020 through 2021. The strong rally throughout that time ended up posting some of the highest returns for the largest companies in the market. For example, Apple Inc. (AAPL) began 2022 as the first company to hit a market capitalization of $3 trillion – something that its investors were surely glad to see, and by now definitely missed as the company recently closed with a market capitalization of just under $2 trillion.
Another high of 2022 and single-handedly the largest driver of market performance throughout the year was inflation. It peaked during the middle of the year in June with a 9.1% year-over-year rate and marked the fastest pace of inflation in four decades. As investors figured we had crossed the peak in inflation, the slump through the first half of the year was met with a brief summer rally. This piece of economic data ended up as the center piece of discussion for the Federal Reserve throughout the year and a big talking point during the August Jackson Hole Economic Symposium, which marked the end of the summer rally. The Federal Reserve members continued to reinforce the stand on interest rate hikes for the remainder of the year. One of the worst lows that came in 2022 was for the bond market. It dropped by over 10% and was the worst yearly performance since the late 1970s. This performance stood out more to investors since equity and bond markets do not tend to fall in such large amounts in the same year.
Although the highs and lows of 2022 were paired with drastic moves, one bit of light here for long-term investors is that the breadth of increases, whether they are in interest rates or prices increases, and the drops such as in stock and bond prices, will likely not be as substantial in 2023. However, this does not mean that we will move to a smoother and more predictable environment. In the grand scheme of things, the gains from 2020 through 2021, and the drop of 2022 ended up becoming a period of slightly less than average, about 19% over the period, compared to an average S&P 500 yearly gain of 7%. So, while in the short-term the last year was ugly, looking at a slightly longer horizon and the returns aren’t all that bad. For the year, the S&P 500, Dow Jones Industrial Average, and Nasdaq are all down 18.11%, 6.86%, and 32.54%, respectively, as of Friday, December 30, 2022.
Your 4th Quarter reports from Apriem will be uploaded to your client portal or mailed to you January 15th for you to review. Please call our office toll-free at (888) 253-0288 to schedule a meeting with your Wealth Manager.
Cheers to a healthy and happy New Year!
Rhonda Ducote, AIF®
President