That’s a wrap folks! What a year it has been on many levels. I don’t know about you, but I am ready to move onward and upward. While we do experience years like 2022 from time to time, they make it hard to be confidant in what might lie ahead. That is certainly the case for how we enter 2023. Inflation persists, the Federal Reserve continues to warn of higher interest rates and the global economy and geo political world keeps us on edge. Again, not much to feel overly excited about right now. I continue to remind myself that we have been here before and have felt like this in the past. As we enter 2023 with a bit of skepticism and uneasiness, it might be helpful to use some historical references to provide perspective.
Negative Events in the Market
Following Year in the Market
1937 Late Depression (-35.0%)
1941 Pearl Harbor / WW2 (-11.6%)
1957 Recession (-10.8%)
1974 Oil Crisis (-26.5%)
2002 Dot Com Bubble (-22.1%)
2008 Credit Crisis (-37.0%)
2022 Inflation / Int Rates (-20%+)
Source: Ibbotson Associates SBBI Data / Jackson National
Keep in mind that past performance is not indicative of future performance, but I do think this paints an interesting picture. It is rare to see consecutive down years in the overall market. It happens, but not very often. Depending on who you listen to or what resource you might read, the opinions vary considerably on how things might play out over the next 6-12 months.
What do we think will occur? As of today, our thinking is that the Federal Reserve will continue to be active through at least the first quarter if not slightly longer. At the conclusion of the Feds December meeting and subsequent rate hike, the willingness to slow down and let the dust settle gained more traction. This is a positive sign that the moves already made are taking shape. It is possible that by late Spring we might see a complete pause by the Fed as a full years’ worth of interest increases will be in place and the full impact of those moves will be “baked” into our economy. A lot to digest for sure, and the proverbial “are we or aren’t we” in a recessionary environment should be on full display. This all sounds scary, but keep in mind that our financial markets tend to take these events into consideration much earlier, often 3-6 months ahead of time. In other words, the correction or price adjustments should already be in place by the time this occurs. To use a baseball analogy, I believe we could be sitting in our 7th inning stretch right now. There is still more game to be played with a lot of action yet to take place, but the table might be set for a better second half in 2023. At least that’s our game plan for now.
In the meantime, we continue to monitor and adjust our portfolios and financial plans accordingly. What we know today, however, can change in an instant. Our world today is truly a global marketplace. The risks abroad and even here at home exists on a much larger scale than ever before. What can you do to preserve and continue to grow your own nest egg? To start, simply spend less than you earn. I suspect all of us have adjusted our spending in some manner over the last year. There are places in our daily lives that may be hard to adjust spending, like the grocery store, but other places can certainly be altered. Speaking of nest eggs, who would have thought that eggs would be the single biggest inflated grocery category over the last year, up nearly +49%! There are reasons for this, primarily the Bird Flu, but yikes. Spending and cash flow are always hot topics but something we can control in many ways. Second on our list of ideas is to keep saving. While it may be painful to see our 401K, IRA, and investment account balances lower today than a year ago, we are continuing to build our futures. Dollar cost averaging now is more important than ever. Remember, you are buying “on sale” and we only get opportunities like this every so often. Take advantage of your company match to its fullest extent where possible. Finally, reach out to us. We have met with many of you over the last few weeks and already have a bustling calendar to start January. It might be time to revisit your plan and make sure you are confidant in where you are heading. That’s what we are here for.
We remain thankful and appreciative for all of you. This has been an interesting year for sure, but our steadfast belief in the long-term prospects of not only our resilient economy, but in the greater global economy as a whole remains intact. Adjusting is a part of life and that is where we stand today as we close out 2022. I look forward to better days ahead but in the meantime I plan to toast to the good things around us. I hope you can do the same.
Happy New year and bring on 2023!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.