Saturday, May 27, 2023

2022 In Overview: Portfolios Ought to By no means Be Set in Stone, However Methods are a Totally different Story


No sense in dwelling on 2022…however for the document, let’s memorialize some stats and figures.  (Hat tip @bespokeinvest for the next charts.)

First, let’s begin at a excessive degree

The chart beneath reveals the annual returns of the S&P 500 damaged down into teams of 10 share factors intervals. You’ll discover that 2022 was the 14th yr since 1928 that the index has been down between -10 and -20% in a single yr. Not solely that however it is usually the seventh worst loss since 1920. You simply depend the containers from 2022 over to the left to see that.

S&P 500 Annual and Avg Returns 1928 to 2022


When you’ve identified me for any period of time, you’ll know I’m keen on distinguishing between ‘potentialities and chances’. Please word the variety of years that fall out to the suitable vs the left on the graph above.

Okay, transferring on…

Right here’s the S&P 500 in 2022, damaged down by months

S&P 500 in 2022


Now, right here’s how the sectors ended up for the yr

I’m utilizing the Russell 1000 (R1000) as a result of some sectors within the S&P 500 solely have a couple of securities, so that is simply extra fascinating.

Under you will notice the R1000 sectors by Return / Whole Market Cap / Change in Market Cap / Ave Dividend Yield – take a look at these prime three adjustments in market cap.

Russell 1000 Stats Year End 2022


Vitality crushed every little thing in 2022. Actually, of the 30 greatest performing R1000 shares, 22 are within the Vitality sector.  Exxon Mobil (XOM) logged a complete return of ~87% for 2022…and it ranked fifth!

Listed here are the highest 5 performers of the Russell 1000:

Russell 1000 Stats - Best Stocks in 2022


Now, let’s strip-out the shares within the Vitality sector and take a look at the highest 10

Of curiosity, solely 8 shares exterior of the power sector had a 50% or greater return for 2022. Two of the most important names in Healthcare, Merck (MRK) and Eli Lilly (LLY), didn’t even clear the +50% hurdle, posting 2022 positive aspects of ‘solely’ 49.4% and 34.2%, respectively.


Best Non-Energy Stocks in 2022


And now, let’s take a look at the ten worst performers within the R1000 of 2022

Breaking it down, it shakes out like this: 45% of shares fell 20% or extra (whole return), 30% fell 30%+, nearly 20% fell 40%+, and 11% fell by 50% or extra. It’s possible you’ll discover your eyes scanning for Tesla as a result of nicely that appears to be the one inventory the press needs to speak about, however it was solely down 65.3%.  It was, nevertheless, within the prime 5 market cap losers of 2022 (second chart).

Worst Performing Stocks 2022 - Russell 1000


Let’s conclude by taking a look at ETF whole returns throughout asset lessons

We’ll take a look at these ETF returns for not simply 2022, however over the past three and 5 years as nicely as a result of (damaged document alert) we preach elevating the money you want for the subsequent 12-18 months to assist keep away from pressured gross sales to fund your wants when the market is down.

Under you’ll discover that some areas that did the worst in 2022 are nonetheless up essentially the most on a 5-year foundation.  For instance, the Nasdaq 100 (QQQ) was down greater than every other main index ETF in 2022, however once you look out over that previous 5 years, it’s nonetheless up essentially the most.

Expertise (XLK) is an apparent sector to take a look at.  It was one of many worst sectors in 2022, however it’s the one sector up greater than 100% over the past 5 years.

For bonds, the long-term Treasury ETF (TLT) has had a complete return of -12.98% over the past 5 years however that’s primarily as a result of 31% drop in 2022. Two different combination bond market ETFs (BND, AGG) are additionally barely down over a 5-year whole return foundation.

Ahem…evaluate that to the S&P’s (SPY) five-year achieve of 56.2%.

Asset Class Performance Last 3 and 5 years


Biggest Market Cap Losers in 2022 - Russell 1000


I’ll conclude with this

Over the long run, the inventory market is undefeated.

We have now been by way of dangerous instances earlier than they usually at all times transform actually good alternatives for long-term buyers to both proceed to be affected person or to put some money to work.

There’s after all no assure that subsequent yr can be higher than this yr, however for these individuals who have the correct long-term perspective on investing and have aligned their portfolios with their objectives and aims issues will transform okay.

How can I be so certain? Refer again as much as that very first chart and you will notice that there have been 20 years the place losses within the S&P 500 have equaled 10% or extra. In any other case often known as double digit losses.

Since I began out within the trade in 1999, I’ve lived by way of 25% of these double-digit losses and in reality, I lived by way of three of them back-to-back – 2000, 2001, & 2002.

Right here’s the chart:

S&P 500 Since the day David B. Armstrong started wealth advising


The important thing to 2023 – and ceaselessly

Confidence is essential.

It’s possible you’ll be saying to your self, “Congrats Dave, you get a gold star for experiencing 25% of these loss intervals…however so what?”

Right here’s what: I keep in mind the teachings discovered, and people experiences had been formative and worthwhile for once I give folks recommendation.

So right here it’s…as an investor it’s crucial that you just turn into snug with uncertainty. Whereas many individuals will talk about the concept of portfolios that take away uncertainty, the fact is that it will possibly by no means be totally eliminated.

A portfolio that reduces uncertainty solely removes anticipated return. If there isn’t a threat of loss, there can by no means be a achieve. It’s merely the best way this works. When you lock a roll of quarters in a protected, bury it in your yard, and dig it up 10 years later, you’ll have a roll of quarters.

I might preserve happening concerning the function inflation would play on this instance, however I’ll depart it there.

Please let go of the fantasy that you just (or your advisor!) can management every little thing or see into the long run with some kind of magic crystal ball. Deal with the issues you’ll be able to management and have a plan and technique for these you could’t.

Portfolios ought to by no means be set in stone, however methods are a distinct story.

If I’ve discovered one factor since 1999, it’s that buyers who arrange a plan and a method that lowers and even eliminates the necessity to liquidate holdings to fund dwelling bills when the market is down will improve their capability to be financially unbreakable.

All the time have a portfolio it is advisable have fairly than the one you want you had.


We’re with you each step of the best way

Make sure to subscribe to our Off The Wall Podcast. Along with persevering with our skilled visitor interviews, 2023 will deliver on extra conversational episodes with simply our staff the place we speak extra in-depth concerning the markets and investing methods. Shoppers will proceed to obtain our month-to-month portfolio updates through e mail, however we can be including a podcast model of that replace as nicely the place we speak by way of our thought course of. Moreover, we can be introducing video to the podcast, which you’ll be able to watch and subscribe to on our YouTube channel.

Actually – I simply assume it’s extra enjoyable and instructive to offer folks with a medium that permits you to hear us speaking, bantering, debating, and discussing fairly than studying an e mail and/or weblog. We get pleasure from civil discourse and it’s in step with our price proposition of ‘Unfiltered opinions and simple recommendation”, so we wish you to listen to it.

And albeit the information helps this – the podcasts and movies are “extra clicked and consumed” than the written stuff.  Emails and blogs will nonetheless exist, however I believe that including the audio and video medium will show to be extra in style, so we’re increasing into including these.

Final yr sucked…little doubt about it however please keep in mind to…

Hold wanting ahead.

DBA Signature


Related Articles


Please enter your comment!
Please enter your name here

Latest Articles