Fixed Income Q3 2020

Pushed lower by monetary policy and direct market intervention (such as asset purchases) by central banks. The result has been that bond holders, who purchase these instruments expecting a steady stream of coupon income, have been forced to accept lower levels of income. Another reason investors purchase bonds is to receive their principal back at a specified time. Unlike stocks, bonds mature and return principal on a maturity date (some bonds have flexible maturity schedules based on “call” provisions that allow the issuer to choose when to redeem the bonds). Unless the borrower defaults – typically a last resort – investors will receive their money back at maturity plus interest earned over the holding period.

In this way, bonds offer not only income but safety of principal. For this reason, bond investments often make sense as a way to invest for shorter-term horizons or to earn some incremental yield above cash
and money market instruments. Because of the relative safety of bonds, having a dedicated allocation to fixed income investments can provide a cushion in the portfolio against overall market risk. High quality bond prices tend to remain stable in times of uncertainty, especially when interest rates are not expected to rise and inflation is low.

As low as bond yields are in the United States, they remain relatively attractive versus the roughly $14 trillion in foreign bonds that trade with negative yields, a dynamic that we do not expect to see in the U.S.

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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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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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