The U.S. economy continually showed its resiliency through a challenging year.
December did not bring the good tidings investors wished for – and typically see in the final month of the year – as most major asset classes struggled at the end of an especially volatile year for the capital markets.
December is historically the third-strongest month for the S&P 500 Index, but the blue-chip stock index declined 5.9%, among its worst December returns since the early 1930s. For the year, the Index was down 19.4%.
Fixed income offered little reprieve from equity struggles. Given the sharp rise in yields, the bond market experienced its worst year since 1975. It was a rare synchronized drop for equities and bonds, which are typically noncorrelated.
“Hopefully, this poor performance for both markets will be isolated to 2022,” Raymond James Chief Investment Officer Larry Adam said. “Our forecasts and outlook for 2023 reflect more positive, albeit more muted returns.”
There are signs inflation is slowing, though some indicators suggest stubborn resilience to efforts by the U.S. Federal Reserve (Fed) to cool the economy. Despite seven rate hikes for a total of 4.25% in 2022, inflation remains elevated.