December 2022 Monthly Index Returns

Happy new year!  I hope everyone was able to enjoy some time off with friends and family.  I know I am excited for 2023!

2022 was quite the year for investments, and not in a good way!  Stubbornly high inflation globally followed by a fast pace of interest rate hikes across developed country central banks led to both negative equity and fixed income returns pretty much across the board. 

In equities:

  • December marked the 4th consecutive month where the S&P had an absolute return > 5%, which is quite astonishing (Sept = -9.2%, Oct = +8.1%, Nov = +5.6%, Dec = -5.8%).  Imagine trying to be a market timer and get that right...
  • Non-US REITs (1.6%), MSCI EAFE Small Cap (1.1%), and MSCI EAFE (0.1%) were the only positive performers for the month of December. 
  • Even with a rising dollar over the year, the MSCI EAFE and non-US REITs outperformed the S&P 500 and US REITs respectively.
  • In the growth vs. value debate, it was value who was the clear winner.
  • Even though investors won't enjoy seeing negative returns in 2022, it serves as a reminder that markets don't always go up.  However, keeping things in perspective, a client that has been invested in the MSCI ACWI for 10 years has still earned an 8.0% return, which is not too shabby.

In fixed income:

  • Shorter duration fixed income generated positive return, while most intermediate and longer term benchmarks were negative in December.
  • YTD, only the 3 month Tbill earned a positive return (1.5%).
  • The Agg fell 13% for the year, far lower than it's previous worst annual return of -2.9% in 1994 (history going back to 1980).  In fact, in 43 years of Agg returns, only five years have been negative, with two of the five coming in 2022 and 2021.
  • On a positive note, with yields where they are today, there is at least more coupon income to offset at least some negative price returns if yields continue to rise.

From  a globally balanced portfolio perspective, a 60% MSCI ACWI Net / 40% Bloomberg Global Agg Hdg USD benchmark dropped -15.3% during 2022.  How does this compare to a sample of other negative returning years?

  • 2018 was the last year this benchmark suffered a negative return, declining -4.9%.
  • 2008 was by far worse than 2022, with this blended benchmark losing -25.6% (note in 2009 the same benchmark bounced back, gaining 22.7%).

Please let us know if you have any questions by

As an additional note, please keep in mind that these reflect historical performance of the current models, not necessarily how accounts were invested in the past.

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