Market Data Bank

4Q 2022

3q20 1
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Stocks posted a strong gain in the fourth quarter of 2022, following three consecutive losing quarters. This chart shows the evolution of the bear market that began on June 13, 2022, as inflation fear spread. Inflation has been lower, but is likely to continue to be a drag on the outlook for economic growth and stocks in 2023.


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In the five years ended Dec. 31, 2022, the S&P 500 stock index total return, including dividends, was +57%. A $1 investment grew to $1.57. However, it required staying invested in stocks through four bear markets. It’s easy to see why sticking to a strategic plan was the best way to manage portfolio risk.

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Of the 10 industry sectors comprising the S&P 500 stock index, energy topped the list in 2022, with a +65.7% return. Energy was the No. 1 sector for the past five consecutive quarters, but it was the worst sector for the five quarters ended 4Q 2020. Formerly hot technology stocks experienced a -28.2% loss.

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Despite the bear market, No. 1 of the broad array of 13 indexes representing investments for the five years ended Dec. 31, 2022, was U.S. stocks. Bonds and foreign equities were laggards. While energy returns were strong in 2022, the index of crude oil investments lost –12.5% versus the +56.9% on the S&P 500 index.

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Although stocks are risky, and subject to bear market drops of 40% or more, they paid an average premium of +8.6% annually over risk-free 90-day U.S. Treasury Bills for the past 20 years. This included bear markets in 2002, 2008, and early 2020 as well as 2022. This is why stocks are a growth engine in a diversified portfolio.

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This is the most important graphic in this report. It summarizes risk and returns of seven distinct asset classes over 50 years. A 7-asset equally weighted portfolio returned nearly as much as an all–stock portfolio but its value fluctuated much less. This illustrates a key principle in portfolio management.

Past performance is never a guarantee of your future results. Indices and ETFs representing asset classes are unmanaged and not recommendations. Foreign investing involves currency and political risk and political instability. Bonds offer a fixed rate of return while stocks fluctuate. Investing in emerging markets involves greater risk than investing in more liquid markets with a longer history. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk of loss. Sources: Sector performance data from Standard and Poor’s. Household net worth data through March 2022 from Federal Reserve Bank of St. Louis, released June 9, 2022; Equity risk premium data from Craig Israelsen, Ph.D, Advisors4Advisors.

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