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  • Writer's pictureHolzberg Wealth Management

A Year In Review. What Happened in 2022 and What Can We Expect for The Economy in 2023?

HWM Market Recap - January 2023

Holzberg Wealth Management Newsletter
Executive Market Summary

At Holzberg Wealth Management, we continuously analyze and study the economy to understand future probable market conditions. Accordingly, we use that knowledge to make educated decisions on how to invest. While the past illuminates and influences the path forward, only over time will we know how events progress. With that in mind, we are seeing many concerning factors playing out that have not occurred in decades and are all culminating simultaneously. Our main concerns for 2023 are:

  • Inflation at 40-year highs,

  • Rising interest rates,

  • A slowing economy indicating a recession,

  • Unsteady geopolitics with the continued war in Europe (the first war in Western Europe since WWII) and the potential Chinese invasion of Taiwan,

  • Domestic politics, including changes to taxes and federal spending, as well as energy insecurity, and

  • The Federal Reserve Board’s monetary policy of reducing the money supply for the first time in seven decades.

Put together, the economy and the country writ large must adjust to many conflicting forces. For investment purposes, the importance of each factor depends on how they influence market activity. For example, do interest rates and the stock market go up, down, or sideways? Consequently, we must manage our risk levels to reflect the circumstances. During times of heightened uncertainty, like now, it behooves us to reduce our risk levels while events unfold.

Other considerations to include in our investment decision-making process are evolving opportunities. For example, with increased interest rates, there are attractive yields on fixed-income securities that were not available this time last year. Additionally, stocks are cheaper now than they were a year ago. However, while some industries are performing well, like energy, others are struggling, like technology. As these changes develop, we will continue to adjust our recommendations.

Inflation remains a central variable in determining the course of events for the economy and the markets. Inflation causes the cost of goods and services to increase. Therefore, we must spend more on basic needs (food, fuel, phone), and less money is available for discretionary items (travel, entertainment, dining out). Furthermore, a business must spend more to keep its doors open and has less to invest for growth. Additionally, governments must meet their increasing obligations, which means higher taxes and/or more borrowing. The net effect is more spending of resources to maintain the status quo, leaving fewer available to grow and invest for a more prosperous future. In other words, what is good for the economy is good for the stock market and vice versa.

One major challenge the Federal government will confront later this year is the need to raise the ceiling on the accumulation of U.S. government debt. A divided and polarized Congress will not easily resolve this dilemma. While I believe Congress will reach a last-minute agreement, it is also likely that the uncertainty will contribute to substantial market volatility.

One indicator to point to as a potential microcosm for the coming economic year is layoffs in the technology sector. Amazon just announced they are laying off 18,000 employees, Facebook (Meta) is laying off 11,000, Google (Alphabet) another 11,000, Intel 8,000, Salesforce 7,000, HP 6,000, and Twitter cut its workforce in half. For perspective, you could fill the Chase Center, the home of the Golden State Warriors, more than three and a half times over with these companies’ layoffs alone, and we expect more to come not only in tech but in other sectors as well. In short, people are spending less, and the economy continues to slow.

All of this leads us to ask, how will world leaders respond to these problems? Specifically, how will they manage the tradeoff between raising interest rates to fight inflation and the damage to the economy of rising interest costs and decreasing liquidity in the markets? Given these historical headwinds, we must be careful with our investments. Consequently, as we enter the new year, we remain cautious.

Markets Overview

Monthly Changes in Major Indices Annual Changes in Major Indices

  • S&P 500: -5.90% S&P 500: -19.44%

  • Dow Jones Industrial Average: -4.10% DJIA: -8.78%

  • Nasdaq Composite: -8.73% Nasdaq Composite: -33.10%

Monthly Performance By Sector Annual Performance By Sector

  1. Utilities (XLU) -0.53% 1. Energy (XLE) +57.60%

  2. Health Care (XLV) -1.91% 2. Utilities (XLU) -1.51%

  3. Consumer Staples (XLP) -2.74% 3. Cons Staples (XLP) -3.32%

  4. Industrials (XLI) -2.96% 4. Health Care (XLV) -3.58%

  5. Energy (XLE) -3.04% 5. Industrials (XLI) -7.18%

  6. Real Estate (XLRE) -4.83% 6. Financials (XLF) -12.42%

  7. Financials (XLF) -5.22% 7. Materials (XLB) -14.27%

  8. Materials (XLB) -5.55% 8. Technology (XLK) -28.43%

  9. Communication Services (XLC) -6.66% 9. Real Estate (XLRE) -28.72%

  10. Technology (XLK) -8.25% 10. Cons Discret (XLY) -36.82%

  11. Consumer Discretionary (XLY) -11.41% 11. Comm Servs (XLC) -38.22%

Monthly Top 5 Performers

Utilities (XLU) -0.53%

Utilities secured the top-performing sector, despite being a negative month overall. Its leaders included: Evergy Inc (+6.28%), Southern Co (+5.57%), Exelon Corp (+4.50%), CMS Energy Corp (+3.70%), and PG&E Corp (+3.57%).

Health Care (XLV) -1.91%

Health Care jumped to the second-best performing sector for December, with its leaders including: Universal Health Services Inc Class B (+7.67%), Organon & Co Ordinary Shares (+7.34%), Align Technology Inc (+7.24%), Teleflex Inc (+6.62%), and Zimmer Biomet Holdings Inc (+6.36%).

Consumer Staples (XLP) -2.74%

Consumer Staples was the third-best performing sector. Leaders in the sector were: Campbell Soup Co (+5.74%), The Estes Lauder Companies Inc Class A (+5.22%), The Kraft Heinz Co (+3.46%), JM Smucker Co (+2.89%), and Lamb Weston Holdings Inc (+2.83%).

Industrials (XLI) -2.96%

Industrials fell from the second-best performing sector in November to the fourth-best in December. Its leaders were: Boeing Co (+6.49%), Pentair PLC (+4.73%), Howmet Aerospace Inc (+4.62%), Northrop Grumman Corp (+2.31%), and Raytheon Technologies Corp (+2.23%).

Energy (XLE) -3.04%

Energy went from the worst-performing sector in November to the fifth-best in December, with its leaders including: Halliburton Co (+4.17%), Schlumberger NV (+4.04%), Baker Hughes Co Class A (+1.76%), APA Corp (-0.36%), and Exxon Mobil Corp (-0.93%).

Political Events Influencing the Economy
  • With the conclusion of 2022, let’s recap some stats for the year:

    • The unemployment rate (from December 2021 to November 2022) decreased from 3.9% to 3.7%. In November alone, the U.S. economy added 263,000 jobs.

    • Over the past year, food prices increased by 10.6%, energy prices increased by 13.1%, shelter increased by 7.1%, and all items increased by 7.1%. The Consumer Price Index (CPI) rose 0.1% month-over-month in November after increasing 0.4% in October.

    • Ten-Year Treasury Yield (from December 31st, 2021, vs. December 30th, 2022) increased from 1.51% to 3.88%.

    • The Average 30-Year Fixed-Rate Mortgage (as of December 30th, 2021, vs. December 29th, 2022): increased from 3.11% to 6.42%. The one-year average was 5.34%, and the average rate for the last ten years has been 3.95%.

    • The last trading day for 2022 was December 30th, and stocks closed out their worst year since 2008. In 2022, bonds suffered their worst selloff ever, the S&P 500 fell 19.44%, and the cryptocurrency market tumbled as several crypto companies (including FTX) went belly up.

    • According to Bloomberg, investment portfolios owned by individual (‘retail’) investors lost a combined $350 billion in 2022, with the average trader’s portfolio down 30% for the year. Consequently, brokerage firms are seeing fewer trades. For example, at the height of the meme stock craze in the first quarter of 2021, Charles Schwab’s trading activity reached 8.4 million transactions on average per day. In the third quarter of 2022, it recorded 5.5 million.

    • As of the end of November, U.S. hotel occupancy, attendance at sporting events, eating at restaurants, and flying on planes have more or less reached their levels from 2019. A striking difference between now and pre-pandemic is office occupancy, which is less than half what it was in 2019. 79% of Americans who can work from home (which encompasses 56% of full-time workers, or more than 70 million Americans) are doing so, either in a hybrid or fully remote arrangement, according to Gallup.

    • Homeownership affordability is at an all-time low. Annual payments for an average home represent 46.3% of the median household income, according to the Federal Reserve Bank of Atlanta. As a reference, housing is considered unaffordable once the payment exceeds 30% of income.

  • The Federal Reserve raised interest rates in December by 0.5% (50 basis points) and indicated plans to continue raising rates into next year to combat inflation. This increase marks the seventh consecutive rate hike in 2022 and has pushed the rate to its highest level since December 2007. To cool inflation abroad, the Bank of England and European Central Bank also increased interest rates by 0.5%.

  • According to AAA, the average price for a gallon of regular gas got as low as $3.13 at the end of December. Compare that to the average price a year ago, which was $3.28. Keep in mind that 2022 saw the highest recorded average price of regular unleaded gas at $5.01 on June 14th.

  • Per a report from, November saw a slight tick-up in rent prices, rising 1.23% since October. Prices are still below their peak in August, with the average price being $2,007 in November, compared to $2,053 three months prior. Year-over-year, the rental prices are up 7.45%. From November 2021 to November 2022, the states that saw the most significant increases were New York (+31.7%), Florida (+23.0%), and South Dakota (+22.3%).

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About the Author

Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and virtually nationwide with the financial decision-making process to organize, grow, and protect your assets.

** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions.


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