Market Musings 1/11/2023

Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!

2022 was a year of skyrocketing #InflationFears, global #UkraineCrisis shock, and #RisingYields skeptics

An unprecedented bull run peaked at the beginning of 2022 with all 3 major indices entering a bear market by the end. The S&P 500 fell -19% by the end while #BigTech heavy NASDAQ tumbled -33%.

Despite opening on #COVIDRecovery optimism, 2022 was a year of skyrocketing #InflationFears, global #UkraineCrisis shock, and #RisingYields skeptics.

Coming into 2022, #InflationFears was a major focus with December 2021 CPI peaking at 6.8%. We highlighted it last year as a primary trend to monitor. Americans across the country have dealt with surging prices all year from groceries to phone bills to gas to flights. While inflation has finally declined off its June peak, 2022 CPI monthly releases all topped last December (only through Nov with Dec 2022 not yet available).

While ongoing #COVID19 supply and logistic issues and #COVIDRecovery demand had been driving rising #InflationFears, Putin’s shocking invasion of Ukraine on Feb 24 only compounded issues in particular energy. Energy prices skyrocketed with crude oil pricing topping $120 per barrel in June up 35% from January. Meanwhile, the national gas average peaked at $5 in June up 50% from January. June CPI peaked at 9.1% with surging energy pricing from the #UkraineCrisis accounting for the rise and most of the decline since.

After arguably fueling rising #InflationFears since #COVID19, the Fed finally took inflation seriously in 2022. The Fed reversed its “easy money” policies by siphoning off large asset purchases and in March finally raising the Fed Fund Rate. Thus began, the era of #RisingYields. While our stance has always been the Fed needs to be and stay aggressive, markets have been skeptical all year and continuously attempting bear market rallies around Fed pivot sentiment.

As expected, #RisingYields has created a negative market environment for Growth stocks. #RiskOn Growth tumbled -31% in 2022 while #Flight2Safety Value only fell -7%. While aggressive strategies still trended towards Growth, our #Flight2Safety defensive positioning partially shielded portfolios from Growth’s fall.

Next: See our 2023 expectations!

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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.

Original Photo by cottonbro studio.