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Saturday, December 31, 2022

2022 US Stock & Bond Market Summary for New Year's Eve

The S&P 500 index fell 19.44% in 2022 and ended the year down 19.55% from its record high set in early January 2022.  

US Stock Markets YTD


With dividends included, the S&P 500 lost 18.2% using Vanguard's VFIAX "S&P 500 Index" Admiral Fund.  US Small cap stocks did worse, causing Vanguard's VTSAX "Total Stock Market Admiral Fund" to lose 19.5% with dividends.  After 20 years of significant outperformance, Vanguard's REIT (real estate investment trust) index fund, VGSLX, lost 26.2% which still beat the Nasdaq which lost 33.1% in 2022!

2022 was one of the worst years on record for 60:40 stock:bond investors in history since both went down.  Here is a chart for illustration.

US interest rates soared this year as the Federal Reserved, late to the "inflation is not transitory" party, raised rates at a rapid pace which led to negative returns for both stocks and bonds. 

US Treasury Rates through 12/31/22



The good news is inflation as measured by annual changes in CPI-U has begun to fall.  A big concern is will it fall fast enough to not get built into the economy and will the Fed engineer a "soft landing" which is lower inflation without causing a recession.  

CPI vs Expected Inflation Rate


LIBOR Rates from 1993 to 12/31/22

My "Newsletter Explore Portfolio" had a good year beating the S&P 500 by 5.5% but it still suffered a decline as I don't believe in trying to jump in and out of the market.  I trade around core positions in my stocks (using buy and sell prices listed ahead of time on page 5 of my monthly newsletter) which does add to return and my large cash position buffers the portfolio in down markets.  
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