The S&P 500 Index fell 18.1%
and the US Aggregate Bond
Index dropped 13% in 2022.

Developed International and
emerging markets declined by
double digits in 2022.

The Fed raised the federal
funds rate seven times in
2022. Once by .25%, twice
by .50% and four times by
0.75%, bringing it to a range
of 4.25%-4.50% at the end of
the year.

The annual inflation rate in
the U.S. slowed to 6.5% in
December and the
unemployment rate fell to


The new lunar year is the Year of the Rabbit and 2022 was the Year of the Tiger. For investors, however, 2022 was the Year of
the Black Swan. The stock market, as measured by the S&P 500 Index, fell 18.1% and the bond market, as measured by the Bloomberg Aggregate Bond Index, was down 13%.

The last time both stocks and bonds decreased in the same calendar year was 1969. The last time they both experienced double digit declines was 1931 during the Great Depression. Global diversification did not provide any ballast as developed international and emerging markets also suffered double digit loses. In 2022 the viciousness of the Tiger transformed into a Black Swan – a rare and unexpected outlier event.


The Fed is attempting to bring inflation down to a 2% annual rate. They likely need to get there by raising

the Fed funds rate to at least 5% and the Fed has already indicated rates could stay there or go higher in 2023, and also 2024. However, bond market expectations are primed for rates to top out at 4.75%- 5.00%, up from the current 4.25%-4.50%. As we’ve seen through the past few quarters, raising the federal funds rate makes new short-term bonds competitive with stocks and reduces demand for equities

The Fed believes the worst of inflation is past us. To be sure of this, they will keep raising rates and see how the economy reacts.In December, CPI was down to 6.5% on an annual basis, compared to 7.1% in November and a 9.1% peak in June 2022. However, the Fed has made it very clear that they will prioritize curbing inflation over growth in the markets.


The Fed is circling and looking for a “soft landing” spot. A location where the economy slows enough to bring down inflation, yet not too slow that the U.S. enters a recession. Minutes from last month’s policy meeting indicated the Fed is concerned that core inflation “would likely remain persistently elevated if the labor market remained very tight.” This is a valid worry given that GDP recovered in Q3 as total economic activity in the U.S. expanded a healthy 2.9%. Another troublesome issue for the Fed is that the unemployment rate fell to 3.5% in December. This historically low unemployment figure will be changing soon.

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The beginning of the year saw layoffs announced by many companies: Amazon 18,000, Google 12,000, Microsoft 10,000, Salesforce 7,000, which is 10% of its workforce, and Goldman Sachs is laying off 3,200, about 7% of its employees, its largest reduction since the Great Recession. These layoffs and a slowing real estate market, as a result of mortgage rates exceeding 6%, do not bode well for the economy. While we prefer the Fed execute a soft landing our expectations are for a rougher and bumpier landing, but a landing nonetheless and not a crash. As a result, we will keep a short-leash on asset allocations and re-balance more often in 2023. Additionally, we will rotate equity allocations into consumer staples and healthcare, sectors of the economy where spending will not be reduced as they are necessities, not sectors of discretionary spending. Another area of increased equity allocation will be dividend paying stocks with a focus not just on current yields, but rather growth in dividend payments. In the fixed income arena, we continue to add to short- and intermediate-term U.S. Treasuries and government agencies for both safety and generous yields of 4.5% to 5%.


The New Year provides many great opportunities to get a financial plan in place or reevaluate your risk profile. The Platt Wealth Management team is here for you to discuss any changes or new milestones in your life. We are always available to assist you with any financial matters and we look forward to continue to serve you along your financial journey.

Warmest regards,
Platt Wealth Management


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