We hope you take some time to enjoy the upcoming holidays with friends and family. Best wishes for an amazing and productive 2023!
2022 was certainly one of the wildest rides in recent memory.
It almost did not matter where you were invested as most investments (stocks, bonds, etc.) faced losses during the year. So why did that happen? The biggest change from other recent market corrections was that bonds lost value due to inflationary pressures. So not only did the stock market perform poorly, but the bond market had one of its worst years ever.
The key point here is that there is risk inherent in investing (stocks or bonds) and most investors forgot about this because over the last few decades, interest rates had moved lower and lower which helped bonds (and stocks) have positive returns. That certainly was not the case in 2022 as interest rates increased sharply throughout the year.
So what about 2023? The key financial points people will continue to watch and talk about are: The Fed (who sets short term interest rates), inflation (why everything costs more $) and if we are in a recession (depends on the definition, but usually 2 consecutive quarters of negative GDP growth).
The Fed is raising short term interest rates in an effort to slow down inflation. As of this writing, while there will likely be additional rate hikes early in 2023, we believe the Fed is nearing the end of their rate increases. When the Fed stops hiking rates or slows the pace of rate hikes this will be a positive sign for the stock market. Rate hikes are usually not great news for stocks since it increases borrowing costs (think about mortgages as an example).
Inflation is still elevated but has started to moderate which again is another positive sign for markets. Inflation and rate hikes will be highly correlated in the new year. When they both start to slow down, markets should react favorably.
Is it possible there could be a recession? Yes. Are we in a recession? It doesn’t really matter. We say that because markets are forward looking, not backward looking. And because markets are forward looking, it really doesn’t matter if we are in a recession today. Only new information that comes out is valuable for making investment decisions.
As you will hear from us time and time again, we believe it is extremely difficult to time the market. And, besides being investors, you are also hiring us to make decisions on your behalf that will benefit you in the long run (or even prevent you from making poor decisions). So, while we can never guarantee anything, we are still optimistic about the future and more positive on both the stock and bond markets than we were a year ago.
You can’t control or predict the market. No one can. It is important to stick to your plan, stay invested and keep your goals in mind as we help you to navigate along the way.
Changes for 2023
Here are some numbers that are changing for next year that you might want to keep in your back pocket. Or, as you know, you can always call us.
North River Wealth Advisors had a very successful launch in June of this year with continued strength through the end of 2022. Our many years of industry experience, thorough due diligence, and significant investments in technology and operations paved the way for a successful launch. We are extremely proud of the firm we’ve built from the ground up with the focus always being on serving our clients. We are thrilled to have nearly 30 clients so far in our short journey. Our #1 priority going into 2023 is serving our clients followed by bringing on the next wave of new clients. If you know someone that could use our help, please send them our way. We are actively accepting new clients and are happy to help!
Authored by Stephen Blahovec and Michael Rausch of North River Wealth Advisors. We are an independent, fee-only financial planning and investment management firm located in Pittsburgh, PA servicing clients locally and across the country. To learn more, contact us here.
This content is developed by North River Wealth Advisors from sources believed to be providing accurate information. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.