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.
Kirk Lindstrom's Investment Letter
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