2022 Market review

-Although stocks ended with their worst performance since 2008, value stocks served as a bright spot for their second consecutive year, outperforming growth by the largest margin since 2000. For 2022 the MSCI All Country World Value Index fell 7.5% vs. a 28.6% decline for the MSCI All Country World Growth Index. This outperformance helped insulate portfolios that overweight value from the impact of the broader market.

-FAANGs (Facebook, Amazon, Apple, Netflix, and Google) saw notable declines in 2022, losing a combined $3.2 trillion in market value. The group collectively underperformed the Russell 3000 Index by more than 20% with Netflix, Amazon, & Facebook seeing the largest declines of the group with drawdowns of 49.6%, 51.1% & 64.2% respectively.

-Inflation reached a 40-year high in the US, and the Federal Reserve pursued a series of interest rate increases to combat rising prices, actions similar to those taken by other nations’ central banks. This action coupled with easing supply chains drove inflation and inflation expectations down in the second half of the year.

-As a result of the increased interest rate environment, conservative investors have very good options to grow their money while preserving principal.

-Russia’s invasion of Ukraine in February brought uncertainty around political stability and energy prices, among other worries.

-A midterm US election shifted more power to Republicans but left Democrats in a stronger position than some had expected.

-At one point in September the S&P 500 Index had given back 50% of its post-pandemic rally but rallied to close the year higher.

-Small cap stocks held their own with large cap stocks.

The market experienced an up and down year but, in the end, it was a year with more down than up. Obviously as an investor, it is never ideal to experience a drawdown of any size, but negative years in the stock market do happen and with some regularity. In fact, since 1926 the S&P 500 has experienced a negative result 1 out of every 4 years. Which is not infrequent, but that still leaves 3 out of 4 in positive territory or 75% of observed periods. Once you zoom out and look at 5- & 10-year overlapping periods this number rises to 88% & 95% respectively (data set includes ‘Great Depression’ period). So while stocks can be down on any given year that does not necessarily mean they will stay down over the long-term, which is why stocks are considered a long-term investment. Although we make no prediction for next year (read this), history has shown that stock gains after declines can add up (read here).


*Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Short term performance results should be considered in connection with longer term performance results.