Weekly Market Report: December 30, 2022

Last week’s Christmas holiday shortened trading week put a bow on the month of December and the year 2022, a year most investors would rather forget. Marked by thin trading volumes and a very light economic calendar, all global equity markets finished the week relatively flat. The S&P 500 closed the month down 5.9%, registering its worst annual return (-18.11%) since 2008, while developed international markets weathered December much better (+0.1%) and finished the year outperforming U.S. markets by losing less (- 14.5%). Rising policy rates and market rates were the primary culprits for the damage levied on both stock and bond markets in 2022. Commodity markets were up slightly in the last week of trading (+0.71%), finishing 2022 up 13%. Interest rates moved higher and steeper for a second consecutive week, bringing the 10 yr UST yield to close the year at 3.88%, up sharply from 2021 closing yield of 1.52%.

Market Anecdotes

  • Putting 2022 in the rearview mirror couldn’t happen soon enough in terms of investment returns for stocks and bonds as the former ranked among the worst and the latter the absolute worst on record.
  • An LPL graphic of the policy driven stock market bounce off Covid lows in February 2020 illustrates how front loaded the market recovery was and possibly why the give back in 2022 was also very pronounced.

  • A look at the major developed market economies and central bank balance sheets illustrates the top-heavy nature of the global economy and the beginnings of central bank balance sheet reduction. Central bank policy rate hikes were also very clearly a coordinated global initiative.

  • GSIR parroted the BCA thesis of increasing real income driving above trend consumption in later 2023 leading to a resumption of potentially inflationary pressures, this time demand driven.

  • An important consideration looking into 2023 is how central a Chinese rebound is to the consensus views of a rebound in raw commodities, including oil and increasing finished goods production serving to further dampen inflation.

  • Policy highlights included a Russian ban on oil sales to countries adopting the price cap on Russian oil, a HOR ban on TikTok, Putin-Xi discussions, POTUS signed omnibus spending package, and a SCOTUS ruling on Title 42.

  • Arbor Data Science charted the annual release of Google search trends, revealing a surprising absence of economic or financial market related searches. Not surprisingly, 2022 trends were dominated by searches for ‘shortages’ of various products including sriracha, baby formula, tampons, diesel, and adderall.

Economic Release Highlights

  • October’s Case-Shiller Home Price Index registered -0.5% MoM and +8.6% YoY price changes, both ahead of the spot forecast and within the consensus range respectively.
  • Pending Home Sales for November fell 4%, below the spot forecast of -0.5% and the low end of the range.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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