Fixed Income Q1 2022

Interest rates are rising – quickly – making bonds more attractive. For example, the 2-year yield on U.S. government bonds increased nearly 2.4 percentage points over the last twelve months, including nearly 1 percentage point in the last month alone! The rise in bond yields in the past few months has created both a challenge and an opportunity for investors. As the Fed pivots toward raising rates to combat high inflation, market expectations drive up bond yields. Given the already low level of yield offered by high-quality bonds, bond prices have come under pressure as investors recalibrate their return expectations. With less income to cushion the price impact, bond “durations” are relatively high for a given maturity, which means the price impact of interest rate changes is greater. Returns for most fixed income sectors were negative through the first quarter of the year due to the increase in market yields, which results in a decline in bond prices. With market yields moving higher, investors have greater potential to generate more income from bond portfolios. We have generally favored exposure to short and intermediate maturity bonds and bond funds in client portfolios for the following reasons: shorter maturity bonds are less subject to price changes as market yields adjust, while bond funds are positioned to benefit in a variety of ways from better reinvestment opportunities and active management.

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Economic & Market Commentary

Fixed Income Q4 2022

The past year has been difficult for fixed income investors, with the sharp rise in bond yields leading to a fall in bond prices. After an extended period of low interest rates, bond prices corrected sharply throughout the year as the Fed raised rates and increased its forward projections for those rates.
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Economic & Market Commentary

Equities Q4 2022

U.S. and global stock markets experienced solid gains in the fourth quarter but remained significantly in the red to end 2022. The S&P 500 Index gained 7.5% in the quarter including dividends, recouping some lost ground but ending the year down 18%. U.S. stock market performance was bad in 2022 no matter how you cut it. However, it is interesting to note that the Dow Jones Industrial Average, which is a stock price-weighted index of only 30 large companies, returned a solid 16% in the fourth quarter and declined only 6.9% in 2022, faring much better than the S&P 500.
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