After 2021 ended the year with a bang, with stocks reaching their all-time highs on the very last day of the year, it’s an understatement to say that 2022 went out with a whimper. The S&P 500 posted a (-18%) return for the year while Carderock stocks were down (-23%), with a balanced 55%-35%-10% (Stocks-Bonds-Cash) portfolio down approximately (-15%). At this stage, we are focused on how disappointing results have presented long-term investment opportunities not seen in years.

With a long history of investing through bull and bear markets, we are acutely aware that major swings such as these are not uncommon…in stocks. Prior to 2022, there had been only four years since 1928 where Bonds and Stocks both posted negative returns for the year. Given that last year’s anomaly is explained by the Federal Reserve’s swift policy reversal of hiking rates from zero, we’re somewhat relieved to consider a reprint in 2023 unlikely.

Looking ahead, we expect 2023 to see a return to the virtues of participating in a balanced portfolio as the Fed nears the end of its tightening cycle. Though we are positioned defensively to start the year, we see more positive developments than what is currently expected among the general investment community.