Research & Analysis


After posting gains in the three previous years, the S&P 500 turned sharply negative in 2022, producing its worst annual result since 2008. For the year, the index finished down 18.1% on a total return basis.

The year was an especially difficult one for bond investors, as a U.S. investment-grade fixed-income benchmark, the Bloomberg U.S. Aggregate Bond Index, finished down 13%. As for government bonds, the yield of the 10-year U.S. Treasury bond finished 2022 around 3.88%, up from 1.51% at the end of 2021.

The past year produced a huge performance gap between the value and growth equity styles, with value recapturing the lead following a strong run for growth in recent years. A U.S. large-cap value index fell nearly 8% on a total return basis while its growth-style counterpart dropped 29%.

The price of U.S. crude oil was set to finish 2022 with an overall gain, but a far smaller one that it had achieved in the immediate aftermath of Russia's invasion of Ukraine. On Friday, oil was trading around $80 per barrel, down from a peak 2022 closing price of nearly $124 on March 8. At the end of 2021, oil was trading around $75.

The year saw wide disparities in U.S. equity performance at the sector level. Entering the final week of 2022, energy was the top-performing S&P 500 sector with a 65.7% total return, followed by utilities (1.6%) and consumer staples (–0.6%). Communication services generated the weakest result with a 39.9% decline, followed by consumer discretionary (–37.0%) and information technology (–28.2%).


After the worst start for the moderate portfolio in over 90 years the article below reminds  investors that time in the market is more important than timing the market and that longer holding periods reduce risk.

The Worst Years Ever For a 60/40 Portfolio


 I don't want to be a Debbie Downer here, but I think under the hood, the labor market data is actually a little bit weaker, and the leading indicators suggest a weakening from here. The silver lining, however, is that the sooner a recession happens, the sooner it's over. And from a stock market perspective, we have discounted, I think, already probably a mild recession. We may still have to go through the rerating process in terms of corporate earnings, but a lot of that negative economic news that I think is just coming to fruition, and we're starting to stack up the dominoes that suggests this is more likely a recession, but the sooner we're in it, the sooner we get out of it. And I think that, to some degree, is what the market has reflected. So probably bumper your news from here, but I actually think getting a recession sooner is more of a positive story for the remainder of 2022 than if we push that off until later this year.


The potential benefits of tax harvesting may be even better for investors in municipal bonds. By applying tax loss harvesting to a municipal bond portfolio, investors don't simply defer capital gains tax liabilities. The goal is to eliminate capital gains taxes completely.


All major Morningstar fixed-income fund categories fell in 2022's first quarter as interest rates soared. The Federal Reserve officially raised short-term interest rates by 25 basis points in March for the first time since December 2018, after hinting it would do so for several months. The Bloomberg Aggregate Bond Index, a proxy for the U.S. bond market, fell 6.1%--its worst quarter in almost 40 years--while the average intermediate core bond Morningstar Category fund lost slightly less: 5.9%.


After the worst bond market rout in decades Vanguard reminds us why it is not time to bail on bonds.


As the 2 and 10 Year Treasury spreads close in on inversion Schwab's Chief Investment Stratagist Liz Ann Sonders gives some additional context to this reliable predictor of recessions.


After a long period of outperformance in Growth vs Value and Domestic vs International/Emerging Markets Morningstar reminds us why it is important to rebalance to reduce portfolio risk.





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