It’s Always Darkest, Right Before the Dawn

First, we wish all our readers a most enjoyable holiday season.

It is not lost on us that Hanukkah, the Jewish Festival of Lights, and Christmas, celebrating the birth of Christ, the ‘light of the world’ for Christians, are both celebrated near the Winter Solstice. Now, each passing day is a little longer and providing a little more light.

Although our outlook continues to call for a recession in 2023, there is some light at the end of the tunnel; we just have to get through the tunnel. Once we do, markets should be come much more friendly to investors. One of the tidbits we offer to support that is the fact that since 1928, the U.S. Treasury Bond has never had three down years in a row (see chart below), and 2022 will market the second year in a row that the Treasury bond return has been negative.

Of course, when bond yields rise, bond prices go down and vice versa, so if bonds are going to have a positive year in 2023, we need to expect Fed rate increases to end and then follow with some moderation of rates. That should allow equity markets to finally pick up their head and begin to perform better as well. Patience is a virtue, and that is especially true for investing.

Better days are ahead. Happy Hanukkah, Merry Christmas, and Happy New Year to all.