Fixed Income Q3 2021

First, they will begin to curtail their purchase of government bonds sometime this year, perhaps as early as November. In anticipation of this announcement, intermediate and long-term bond yields have risen in recent weeks, with the 10-year U.S. Treasury Note yield rising to 1.53% vs. 0.68% a year earlier, as of September 30. The Fed has also stated it is willing to tolerate a temporary period of inflation above their target of 2% before raising short-term rates. The Fed is now guiding the market and investors to expect a hike in the federal funds rate sometime in the second half of 2022. After many years of ultra-low (or zero) interest rates, a gradual rise in rates would be welcome for bond investors. Higher yields would translate to more income generated from bond investments, and would also signal a return to more normal financial conditions.

Corporate balance sheets and cash flow generation are the healthiest in many years and the incremental yield (or “spread”) that corporate bonds pay above government bonds is low. In this environment, we expect bonds to provide a modest amount of income as well as greater liquidity and price stability versus stocks. In addition to looking at the income generated from fixed income investments, we also monitor credit risk, which can impact stability and returns.

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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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