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AWM Q4 Investment Commentary

Although 2022 was a challenging year for investors, the fourth quarter provided some welcomed relief to investors as both stocks and bonds rallied to close the year. For the quarter, U.S. large-cap stocks were up 7.6% and small-cap stocks gained 6.2%. U.S. value stocks were up 12.4% for the quarter, trouncing growth stocks which were up 2.2%. Foreign-developed stocks were the top performers for the quarter, up 17.4%, while emerging stocks also outperformed U.S. stocks and finished up 9.8%. Core U.S. bonds were up 1.9% for the quarter as U.S. Treasury yields rose modestly. Inflation-sensitive bonds were up 1.8% and high-yield bonds had a solid gain of 4.2%. In general, yields rose throughout the year and should improve the return potential of bonds looking forward.  

In this quarter's commentary, we focused on the following topics:

  • 2022 - The Highlights and Lowlights: we summarize some of the most relevant highlights and lowlights that took place during the year.  
  • Themes That Will Impact Our Investment Decisions in 2023 and Beyond:
    • The End of an Era: we review significant changes to monetary and fiscal policy that took place in 2022.
    • Dumb and Dumber: we compare the speculation in risky assets that took place in the past couple of years to the Tech Bubble of the late 1990s.
    • Can Value Stocks Continue to Outperform?: we look at the valuation relationship between growth and value stocks and whether value stocks can continue to outperform.
    • Small-cap Stocks are Trading Historically Cheap: we compare the relative valuation of large-cap and small-cap stocks and discuss whether small-cap stocks are positioned to outperform.

Please give us a call if you have any questions regarding the investment commentary or would like to discuss your personal investment strategy. 

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