Insights

Q4 2022 U.S. Economic and Financial Markets Review

GDP grew by 3.2% in the 3rd quarter, reversing the negative trend of the prior two quarters. The unemployment rate held steady at 3.7% through November. This coincides with a tight labor market; there were approximately 10.5 million job openings for six million unemployed workers at the end of November. Domestic inflation showed a reading of 4.7% in November as the Fed’s preferred gauge of overall inflation, the core Personal Consumption Expenditures (PCE), remained well above the Fed’s long-term target of 2.0%. Headline inflation, as measured by the Consumer Price Index (CPI), closed out November with a reading of 7.1%. These readings tend to differ primarily because CPI includes volatile categories like food and energy in its methodology while core PCE does not.

Domestically, all size and style equity categories were up during the quarter. International developed stock markets also posted positive performance. For U.S. investors, international stock returns were positively impacted during the quarter by the weakening U.S. dollar. International value stocks were the best-performing equity asset class, and U.S. real estate investment trusts (REITs) were the worst-performing equity asset class during the quarter. Signs of inflation easing, and correspondingly lower future interest rate increases likely contributed to positive returns for U.S. and global bonds.

While investment results in 2022 may be disappointing, if we zoom out a little, we’re reminded of the remarkable resiliency of markets and the long-term opportunity for investors who stay the course.

In the U.S., small-cap stocks lagged large-cap stocks in the value and core styles while outpacing large-cap stocks in the growth style. Growth stocks lagged value stocks in all size categories. Among the nine style boxes, large-cap value stocks performed the best, and large-cap growth stocks had the lowest return during the quarter.

In developed international markets, large-cap stocks outpaced small-cap stocks in all style categories. Growth stocks lagged value stocks in all size categories. International large-cap value stocks performed the best, and international mid-cap growth stocks. had the lowest return.

For more on the markets, see our 2022 Market Review.

Keeping things in perspective

Sometimes, we give too much importance to a single year, and we may feel that today’s picture is bleaker than the reality for a long-term investor. One year is a relatively short period in the context of an average investor’s investment horizon.

Further, we can take some comfort in knowing that markets have overcome many tough times in the past and, over the long-term, have played an essential role in helping investors achieve their investment goals. Taking account of the longer three-year period helps to remind us of this.

Important deadlines and dates

Jan 31 – Feb 1………… Federal Reserve Open Market Committee meeting

February 14…………….. Valentine’s Day

February 20 ……………. Washington’s Birthday – Markets & ZRC offices closed

March 8…………………….. International Women’s Day

March 15 – 16………… Federal Reserve Open Market Committee meeting

March 17………………….. St. Patrick’s Day

March 23………………….. Ramadan

April 5……………………….. Passover

April 7 ………………………. Good Friday – Markets & ZRC offices closed

April 9……………………….. Easter

April 18…………………….. Tax Day / Estimated Tax Payment

As always, we’re grateful for the opportunity to serve you and your loved ones. Please contact any one of us to address any concerns or questions you or a loved one might have.

Sincerely,

ZRC Wealth Management, LLC

925-962-5600 or 707-524-6131

www.zrcwm.com

To schedule a 30-minute meeting with Barry Mendelson, CFP® – Wealth Advisor & Financial Planner https://calendly.com/zrc-barry-m/meet-with-barry

To schedule a 30-minute meeting with Kevin Goulding, CFP® – Wealth Advisor & Financial Planner https://calendly.com/kevin-goulding/meet-with-kevin

Sources: Dimensional Fund Advisors, Buckingham Strategic Partners, SECURE Act 2.0: Later RMDs, 529-To-Roth Rollovers, And Other Tax Planning Opportunities.  Jeffrey Levine, CPA/PFS, CFP®, AIF, CWS®, MSA, Avantis Monthly ETF Field Guide, December 2022

All investing is subject to risk, including the possible loss of the money you invest. Past performance is no guarantee of future returns. Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.