Market Recap: December 2022
January 05, 2023
Market commentary
- U.S. GDP revised upward to 3.2% in Q3, reversing two straight quarters of declines, but trajectory is concerning
- Manufacturing economy now in second month of contraction as interest rate increases take effect
- Inflation is elevated and of great concern, but recent reports indicate some cooling
Select economic and market data
Statistic (monthly unless noted) |
Current |
Previous |
|---|---|---|
| U.S. GDP (quarterly) | 3.2% | -0.6% |
| Consumer Confidence | 108.3 | 101.4 |
| Consumer Price Index Y/Y | 7.1% | 7.8% |
| Core PCE (x food & energy) | 4.7% | 5.1% |
| ISM Manufacturing Index | 48.4 | 49.0 |
| Unemployment Rate | 3.7% | 3.7% |
| 2-Year Treasury Yield | 4.42% | 4.38% |
| 10-Year Treasury Yield | 3.88% | 3.70% |
Equities
- Stocks ended the year with a thud after regaining footing in November
- 2022 return divergence was extreme, with high-growth tech names strongly underperforming more defensive value
- International indices significantly outpaced domestic counterparts for the quarter on U.S. dollar selloff
Fixed income
- Treasury yields were up slightly in December, with the 10-year finishing at 3.9% after peaking above 4.2% in October
- Fed raised rates seven times in 2022, pushing target rate to 15-year high
- Fed signaled Fed Funds Rate between 5.0% and 5.5% in 2023
Strategic outlook
- Above-average volatility is likely to persist given inflation debate and heightened central bank involvement
- Some caution is warranted especially on international equities, favoring small-cap and mid-cap domestic stocks
- Maintaining shorter-duration fixed income exposure, but intermediate part of the curve is starting to look more attractive
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