{
    "componentChunkName": "component---src-templates-blog-post-index-tsx",
    "path": "/viewpoints/market-commentary-q4-2022",
    "result": {"data":{"sanityBlogPost":{"seo":{"description":"Commentary on financial markets, including stocks and bonds","keywords":"market commentary, investment insights, stocks, bonds, interest rates, inflation, planning, financial advisor, Bangor, Portland, Maine","image":null,"title":"Market Commentary - Q4 2022","twitterCard":null,"twitterCreator":null,"twitterSite":null},"title":"Market Commentary - Q4 2022","slug":{"current":"/market-commentary-q4-2022"},"backgroundColor":null,"_rawCategory":{"_id":"29acb39b-24bb-436b-ad77-d0107118efa0","_type":"blogCategory","_rev":"KzOl5qDGvnMpGIFcZdegSQ","_createdAt":"2021-06-09T14:29:38Z","_updatedAt":"2023-01-18T17:57:14Z","category":"Quarterlies","id":"-24f6d17c-bdbb-5197-ad9e-5411edcf48b6","children":[],"internal":{"type":"SanityBlogCategory","contentDigest":"d135a5374755f91ff31f9e0aba9d4ff0","owner":"gatsby-source-sanity","counter":123},"parent":null},"author":"Birchbrook Team","date":"2023-01-09","image":{"asset":{"fluid":{"base64":"data:image/jpeg;base64,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","aspectRatio":0.6666666666666666,"src":"https://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg","srcSet":"https://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg?w=1246&h=1869&fit=crop 1246w,\nhttps://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg?w=2492&h=3738&fit=crop 2492w,\nhttps://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg 4984w","srcWebp":"https://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg?fm=webp","srcSetWebp":"https://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg?w=1246&h=1869&fit=crop&fm=webp 1246w,\nhttps://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg?w=2492&h=3738&fit=crop&fm=webp 2492w,\nhttps://cdn.sanity.io/images/9js02fjq/production/f41b59696cdf91f797eceade1ba08dc9bf9d27d0-4984x7476.jpg?fm=webp 4984w","sizes":"(max-width: 4984px) 100vw, 4984px"}}},"_rawArticle":[{"_key":"a215522f2b3f","_type":"block","children":[{"_key":"17926c9145d70","_type":"span","marks":["em"],"text":"Below is an excerpt containing this quarter's market commentary. To download a copy of our full quarterly newsletter, click the Download Article link. "}],"markDefs":[],"style":"normal"},{"_key":"91de0f271861","_type":"block","children":[{"_key":"9a83f7f18b1e0","_type":"span","marks":[],"text":""}],"markDefs":[],"style":"normal"},{"_key":"5a34ba5318ee","_type":"block","children":[{"_key":"f3b1f0cefe270","_type":"span","marks":[],"text":"After the bear market of 2020, which lasted a few weeks, the S&P 500 ended 2020 up almost 21% and then followed through with a 29% return in 2021. It was an impressive run for the market and equity investors were amply rewarded.Perhaps then it should not have come as a surprise when equity markets, on the heels of such a strong run up, began to deflate early in the year. The 2022 bear market, unlike 2020, has been more tenacious, lasting a year and counting.From the peak in January to the recent trough in October, the S&P 500 declined -27.5%.That is not quite as punishing as 2020, which declined 34%, before recovering to end the year in positive territory. As of year-end 2022 the S&P 500 had declined 18.1% on a total return basis and it is possible we could test the October low again in 2023."}],"markDefs":[],"style":"normal"},{"_key":"0655bef87d60","_type":"block","children":[{"_key":"72bf220e994e0","_type":"span","marks":[],"text":"Further exacerbating the pain in 2022 was the decline in fixed income values.Many investors employ a balanced approach to investing, offsetting equity risk with the relative stability of fixed income.Generally during times of equity stress fixed income will benefit from a flight to quality.Investors seeking a port in the storm will rush to the relative safety of bonds, often driving prices up and yields down.This year was different however, as bond yields rose in spectacular fashion across the entire yield curve.The ten-year Treasury, a popular proxy for long term interest rates, rose from 1.5% to 3.8% after peaking at 4.2%.The two-year Treasury note rose from .77% to 4.41%, an over five-fold increase.The Bloomberg Aggregate Bond Index declined 13.01%, its worst showing in a calendar year since 1977 when data began being collected."}],"markDefs":[],"style":"normal"},{"_key":"9160f5d66ca5","_type":"block","children":[{"_key":"3f81011581670","_type":"span","marks":[],"text":"The events that led to the weakness in both stocks and bonds in 2022 really began in 2020, a result of the COVID-19 pandemic and fiscal stimulus from both the Federal Reserve and the US Government.At the onset of the pandemic, the Fed implemented a range of measures to provide economic relief, including slashing interest rates to near-zero levels, launching a series of quantitative easing programs to inject liquidity into the financial system, and providing targeted lending programs to support businesses and households. These measures helped to stabilize financial markets and support economic activity, while also helping to keep borrowing costs low for businesses and households.It was an unparalleled level of support as the Fed grew their balance sheet from $4.17 trillion at the beginning of 2020 to over $7 trillion in just five months.During the depths of the crisis this support helped to cushion the economic blow of the pandemic and provide support for the US economy.But by injecting so much money into the economic system in such a short period of time they planted the seeds of inflation.This tremendous amount of liquidity combined with supply disruptions for commodities and manufactured goods worked to drive prices higher.Inflation as measured by the Consumer Price Index started moving higher early in 2021 and hit a peak level of 9% in June of 2022.After a decade of inflation running close to 2%, consumers saw changes in the price of goods and services that hadn't been seen since 1981. "}],"markDefs":[],"style":"normal"},{"_key":"343c6998703a","_type":"block","children":[{"_key":"e954b3dad6f20","_type":"span","marks":[],"text":"When inflation proved to be less than transitory in 2021, the Federal Reserve again sprang into action, reversing course and beginning to tighten monetary policy.Beginning in March of 2022 they raised the discount rate seven times to end the year at 4.5%.It was this rapid shift from a near zero discount rate that caused both stocks and bonds to slide.The Fed targets an inflation rate of 2%, so clearly there was work to be done to bring prices in check.After their most recent meeting in December of 2022, Fed Chairman Jerome Powell confirmed that despite the high level of inflation moderating somewhat, it was still well beyond their comfort level and the Fed would have to do more to ensure price stability."}],"markDefs":[],"style":"normal"},{"_key":"db25162666f4","_type":"block","children":[{"_key":"48834664aa7d0","_type":"span","marks":[],"text":"As we enter 2023 all eyes continue to be on the Federal Reserve and inflation.With the rapid rise in interest rates and continued tightening of monetary policy , the odds of a recession in 2023 increase.If we experience higher inflation the Fed will continue tightening. Lower inflation and a softer job market may give the Fed room to pause. Current equity prices are already pricing in a mild recession, so the direction of US equity prices from here will be somewhat data dependent.Weaker than expected GDP and employment numbers will be well received. Higher inflation and stronger economic activity will keep monetary policy tighter for longer and be a negative for stock prices and the economy in the near term."}],"markDefs":[],"style":"normal"},{"_key":"5374d09e08f9","_type":"block","children":[{"_key":"0154b5f248af0","_type":"span","marks":[],"text":"For fixed income investors we expect 2023 to be a better year than last.That may be setting the bar low given what a challenging year 2022 was for bond investors.Regardless though, it is unlikely that rates rise to the extent they did last year.While we expect the Fed to continue to raise rates in 2023, we believe it is unlikely they move much above 5% on the discount rate.That is only a 50 basis point (0.50%) hike away.Further, current yield levels represent a good opportunity to lock in rates that may not be available in a year or more."}],"markDefs":[],"style":"normal"},{"_key":"93a680248c5c","_type":"block","children":[{"_key":"7fe975d3812c0","_type":"span","marks":[],"text":"After a challenging 2022 we are optimistic that the New Year represents a chance for markets to recover, barring a deep recession.We still expect to see volatility as investors sort out conflicting data points and Fed positioning, but if recent trends in inflation continue we may be on the right path."}],"markDefs":[],"style":"normal"},{"_key":"2e887f68e32d","_type":"block","children":[{"_key":"77623cb873c60","_type":"span","marks":[],"text":"We will continue to monitor events as they evolvewhile positioning portfolios to weather economic challenges and taking advantage of investment opportunities.Please feel free to call with questions or to set up a convenient time for a portfolio and financial plan review. We wish you a happy and healthy New Year and look forward to working with you in 2023."}],"markDefs":[],"style":"normal"}],"file":{"asset":{"url":"https://cdn.sanity.io/files/9js02fjq/production/eb3ec5cf26db199407c95d08e89beaa3a41a94cf.pdf","originalFilename":"Birchbrook - 2022 Q4 Newsletter.pdf"}}}},"pageContext":{"slug":"/market-commentary-q4-2022"}},
    "staticQueryHashes": ["1153297478"]}