Q3 2022 Market Report

Markets continued to decline in Q3 following one of the worst performing quarters since the Great Recession in Q2.  Inflation resumed its acceleration causing the Fed to react and move from its “transitory” stance to an aggressive monetary posture, dramatically increasing interest rates at Fed Meetings in Q3.  In turn, the Fed’s actions caused lower valuation multiples in the markets and raised the cost of credit markets, likely sending many of the world’s economies into recession, and leading to the market sell off in Q3.

Both stocks and bonds were down for the quarter where only a few commodities, particularly natural gas (+24%) and corn (+8%)  performed well.  Riskier assets performed worse in the quarter except for small cap stocks who hung in fairly well.  Rates greatly increased for the quarter improving interest on bonds but lowering their price.  And, although this change in credit markets was felt around the world, still 7 countries had gains in the quarter (see QMR link below for details).

Psychological we tend to feel bad when markets inevitably decline.  We might even question why we are investing.  But, we know investing exposes us to volatility and it is uncomfortable because we don’t have control of the markets.  But, this market reset  also creates opportunities.  When inflation gets under control our bond investments will be earning higher income.  And, are stock investments will have the potential for higher expected returns which can help grow our portfolios for years to come.  It may not feel good, but the market history often demonstrates that doing what doesn’t feel good is actually the better choice for our wealth as long as we don’t need those funds now.