2022 Market Review and Outlook for 2023

Kevin Wangen, Wealth Management Associate

The economic and investment landscape for 2022 was memorable – and not in the way most of us want to remember.

Despite the increased optimism from investors as we rolled into 2022, the S&P 500 finished the year down 18.13%. The U.S. bond market, normally a safe haven when equity markets fall, posted returns of -13%. Inflation soared to 40 year highs. Interest rates rose to their highest levels since 2008. Egg prices went from roughly $1 per dozen to over $4 per dozen.

Through all of that, it didn’t seem like the sky was falling. We managed to avoid a recession, at least by the traditional economic definition. Unemployment remained low. The S&P 500 loss for 2022 put the value back to where it was 22 months ago in May 2021, a comparatively minor loss to other major market pullbacks. For context, The Great Recession of 2008 erased almost 12 years of gains.

The international markets did not fare quite as well through much of 2022. Most of Europe experienced higher inflation than the U.S.. They avoided a recession because declining oil prices and government subsidies softened the blow when the supply of Russian natural gas was shut off. China also fared better than expected when their “COVID-zero” policy was relaxed and an unexpected rate cut was announced.

Back in the U.S., there is still work to do in 2023. The overall market has shown strong signs of reemergence during the first part of the year. The Fed continues to raise interest rates, albeit at a much slower pace, in its efforts to curb inflation. So far it seems to be working. Return prospects for bonds should be more favorable as the Fed rate hike cycle comes to a close. Even egg prices have started to come down.

Here at Heartland Trust, we continue to do our due diligence with respect to the investments we choose . Our investment process is detailed, tested, and focused on the long-term. We work to capture as much of the upside gain as possible when the market is thriving, while limiting the downside loss during periods of market turbulence.