New Year, Same Market Challenges?

Same Market Challenges in 2023?

New Year, Same Market Challenges?

Please note: This update was prepared on Thursday, January 5, 2023, prior to the market’s close.

What will 2023 bring investors? No one knows for sure—though you can find plenty of people loudly and confidently telling you, with a dubious degree of certainty, they do know. (They don’t.)

We aren’t going to put a stake in the ground, but we’re operating on the belief that many of the same themes that defined the last half of 2022 remain paramount today. The job market is resilient. The Federal Reserve is hyper-attuned to inflation. Potentially troublesome signals of recession are still cropping up.

Though the second two themes sound ominous for investors, some of the historical data we review below suggests better days in both the bond and stock markets are not that far away.

Here’s what we’re watching and why:

  • Stock traders are wary. The minutes released from the Fed’s December meeting offered no definitive hints at whether a 0.25% (or higher) interest-rate hike is in the offing for February. Policymakers cautioned investors that they remain steadfast in their resolve to bring inflation down, regardless of how long it takes and despite the economic headwinds the effort may bring. At least one Fed governor has suggested the policy rate could rise to 5.4% from its current 4.5%.
  • Even as Amazon and Salesforce announce layoffs—admitting to overaggressive hiring during the pandemic—the overall labor market remains robust. Job openings were historically high in November with nearly two openings for every unemployed worker. Quits also stayed high, demonstrating that workers are confident they’ll be able to find a new, better job.
  • The manufacturing sector stumbled into year-end, contracting in December at the fastest pace since the early days of the COVID-19 outbreak. After a 29-month stretch of expansion, the industry’s primary gauge has moved lower for two consecutive months. We’re keeping an eye out for data on the much larger and more important service side of the U.S. economy, which, so far, continues to expand.

Chart of the Week: Good Markets Often Follow Bad Ones

Portfolio Manager Jeff DeMaso 

When stock prices are down, it sometimes feels like they’ll never rebound. But history tells us that bad times in the stock market are eventually followed by better times.

Last year was one of those “bad times” for stocks. The S&P 500 index fell 19.4%—that’s not including dividends. It was the index’s 18th negative calendar year since its inception 65 years ago. Its first full calendar year was 1958, and since then the S&P 500 has posted gains in seven out of 10 years.

I went back and looked at how the S&P performed after each of its 17 prior negative calendar years. Not only did the index make gains in all but three of the following years, but the average return was 12% (or 19% if you look at the median return). And that’s not counting reinvested dividends.

In other words, it’s no guarantee, but bad years in the market are typically followed by good years.

Note: Chart shows calendar years when the S&P 500 index declined in price and the performance of the index the following year from 1958 through 2022. Sources: S&P Global, Adviser.

Signal From Static: Is Gold Really Golden?

Co-founder and Chairman Dan Wiener

It’s an old Wall Street axiom that “even a stopped clock is right twice a day.”

What’s also true is that whenever inflation rears its head or turmoil infects the markets, pundits pushing gold begin yelling louder.

Recently, the “gold bugs” (as they’re known) have been trotting out their predictions for the shiny metal’s price in 2023, suggesting, for instance, that gold could hit “$3,000 or $4,000 an ounce.” Given that gold is currently selling for less than $2,000 per ounce ($1,826 at the end of 2022), these predictions are both mouthwatering and, in my view, nonsensical. That said, they certainly appeal to investors who saw both stocks and bonds take a whacking in 2022.

One proponent of higher gold prices claims that central banks around the globe are buying and will continue buying gold, pushing prices higher. He also reports that central bank purchases hit an almost half-century record of $20 billion during 2022’s third quarter. What goes unsaid, however, is that gold’s price fell 7.5% during the period. So much for demand driving up prices.

Higher inflation is also providing gold bugs with reasons to think the metal will soar. And yet, the latest reads on inflation have been falling, not rising. During 2022, when inflation hit a high of 9.1% in June, gold fell. In fact, in the run-up to that June inflation reading, gold’s price declined fractionally, and it then fell further into the year’s end.

Gold simply isn’t a reliable hedge against inflation. Yes, gold rose in price dramatically during the 1970s—the last time inflation was running hot. But as you can see in the chart below, gold is still well below the inflation-adjusted high it reached way back in January 1980. That’s four decades of losing value after inflation. Where’s the protection?

Gold a poor store of value
*Price reached mid-month, which is why the line (showing month-end prices) does not touch this point.
Note: Chart shows the price of gold along with its price adjusted for inflation at the end of each month from 4/30/68 through 12/31/22. The inflation-adjusted price is based upon changes in the consumer price index. Sources: Adviser, Dow Jones, U.S. Bureau of Labor Statistics.

Finally, gold bugs always fall back on “technical” signs that the metal is poised to rally, using measures such as 50-day and 200-day moving price averages to identify “breakouts” and other signaling nonsense.

The pundit who’s currently predicting gold will rise to between $3,000 and $4,000 also saw a rally coming in August 2021. He wrote, with some suspicion, that gold’s price was being suppressed by manipulators in the futures markets and that “we could see gold at $2,000 to $2,400 per ounce.” At the time gold was selling for $1,815 or so—about where we are today.

Gold for your portfolio? Bah! As I like to say, the best investment you can make in gold is to put some around the finger of someone you love.

Review Your 2023 Financial Plan

Manager of Financial Planning Andrew Busa

Each new year brings new resolutions. While we believe this is an opportune time to reassess your financial goals and aspirations, we also understand that the start of the calendar year creates a deluge of tasks, so we’ll keep our advice brief and to the point.

Are you planning any major expenses this year? Whether it’s a home renovation or the purchase of a vacation house, the start of college tuition payments or plans for some major travel, you may want to check that your cash balance or income will meet your needs. Are you worried that inflation may be an issue you haven’t factored in? (You can use our Budget Worksheet to help figure out where you stand.)

If you find this all a bit too complex to handle solo, please call your wealth management team to review your spending plan for 2023. Even if you think you’ve got this covered, we’d encourage you to give us a call to either put a sound financial plan in motion or refine your existing one with inflation in mind.

After all, it pays to plan for how you’ll spend and how you’ll save. Take the time today to evaluate your cash reserves and expected income over the next year. If you think you may need to bridge a gap, we’re here to help.

Are there any financial planning or tax topics you’d like us to address in a future edition of the weekly email? Please let your wealth management team know or write to us at info@adviserinvestments.com. We’d love to hear your suggestions.

Strategy Activity Update

Please see below for a summary of the trades we executed over the week through Thursday and our current tactical strategy allocations.

Dividend Income

No trades

AIQ Tactical Global Growth

Sell iShares MSCI EAFE Growth ETF (EFG)

Buy iShares US Pharmaceuticals ETF (IHE)

Tactical Global Growth strategy

AIQ Tactical Defensive Growth

No trades


AIQ Tactical Multi-Asset Income

Sell iShares 20+ Year Treasury Bond ETF (TLT)

Buy Cash




AIQ Tactical High Income

No trades

Adviser in the Media

Earlier today, Portfolio Manager Adam Johnson appeared on Fox Business to discuss the future of bitcoin. And in our most recent Adviser Takeaways, Senior Research Analyst Liz Laprade opined on what investors can expect in the year ahead, while Manager of Financial Planning Andrew Busa presented four financial resolutions to consider making this year.

Looking Ahead

Next week brings fresh data on consumer credit and sentiment, small businesses, and wholesale inventories, as well as a raft of inflation reads, including the December consumer price index.

As always, please visit www.adviserinvestments.com for our timely and ongoing wealth management commentary. In the meantime, all of us at Adviser wish you a safe, sound and prosperous future.

About Adviser

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


Please note: This update was prepared on Thursday, January 5, 2023, prior to the market’s close.

This material is distributed for informational purposes only. The investment ideas and opinions contained herein—including but not limited to the Your Question Answered section—should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Purchases and sales of securities listed above represent all securities bought and sold in each strategy during the period stated. Each strategy’s portfolio generally includes more holdings in addition to the transactions listed above and in some cases the securities listed above may only represent a small portion of the particular strategy’s complete portfolio. Further, the securities listed above are not selected for listing based on their investment performance; thus it should not be assumed that any of the securities listed above were profitable or will be profitable, nor should it be assumed that future recommendations will be profitable. Clients and prospective clients should only make judgements about a strategy’s performance after reviewing the strategy’s composite performance information. There is no assurance that each security listed above will remain in the strategy’s portfolio by the time you have received or read this email. Securities are listed for informational purposes and are not intended as recommendations. Existing investor accounts may not participate in all transactions listed above due to each account’s particular circumstances.

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