Market Update: January 20, 2023

Welcome to the Weekly Market Update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth, and here’s what happened in the market this week.

 

We’ve gotten a bit more volatility this week with a small pullback throughout the week. The downward trading pattern is technically still intact although there is still upside momentum for the rally beginning in October. There is an important threshold around 3800, established in December, that needs to hold should prices retest that level.

In the news this week, Google parent company Alphabet is set to cut 12,000 jobs, the largest ever job cut in the company’s history. Tesla CEO Elon Musk sold more Tesla shares this past quarter. And it appears Congress will once again be fighting over the debt ceiling adding to the plethora of bad news events in the world today.

Speaking of bad news, 2022 was a really rough year for investors. The calendar year ranks as one of the worst for stocks with an 18.1% decline. It was the third worst year for the typical retiree 60% stock, 40% bond portfolio with a 16.9% decline, finishing just behind the Great Depression. Which must mean it was one of the worst years ever for bonds. It should be no surprise that headlines are ranking 2022 as one of the worst years ever for investors, but it’s important to put this into perspective. Mainly because the markets do not obey calendar years. Think about this, as bad as 2022 was, was it actually worse than the 73/74 bear market? Or the Dotcom crash? Or World War 2?

The answer is no. But let’s dive in. Rather than compare returns based on the arbitrary calendar year, let’s look at the declines peak-to-trough and compare 2022 to the Global Financial Crisis. In 2022, stocks declined 25.1% peak-to-trough that lasted 204 days. Likewise, bonds declined 17.4%. Thus, the 60/40 portfolio declined 21.4%. Compared to the Global Financial Crisis, those returns really aren’t that bad. Peak-to-trough, stocks declined 55.2% over 350 days. Bonds declined 14.5% over a very short time period. And the 60/40 portfolio declined a whopping 36.7%. Clearly, the Global Financial Crisis was a worse event for investors. And I would further argue that the 73/74 bear market, the Dotcom, and World War 2 were also worse. Perspective matters people.

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Sources:

1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved January 20, 2023, from FactSet Database.

2.Carlson, Ben. A Wealth of Common Sense. “2022 was one of the worst years ever for the markets.” Written Jan 2, 2023. Retrieved from https://awealthofcommonsense.com/2023/01/2022-was-one-of-the-worst-years-ever-for-markets/

3.FactSet Research Systems. (n.d.). S&P 500 & US AGG (Interactive Charts: exports). Retrieved January 20, 2023, from FactSet Database.

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