2022 is in the history books, and few investors are sorry to see it go.
It was a rough year — almost from the beginning. The stock market hit its all-time high one year ago today, the first trading day of 2022. There's been little to cheer about since. And far from being a safe refuge, the bond market saw one of its worst years ever.
Was the rough-going a surprise? In some ways, yes. In other ways, not at all.
Market reversals are an unavoidable fact of life for an investor, as noted in an article elsewhere on this site (How to Start Investing the SMI Way!).
While the stock market's long-term trend is upward, its actual path is neither smooth nor straight. Instead, that path is marked by many twists and turns, with some scary downturns thrown in for good measure!
So, before you start your investing journey, accept that the terrain will get rough from time to time.
This bear market may drag on for a while yet (no one knows), but it's encouraging to remember that bad markets eventually give way to good markets.
A graphic from Macrotrends illustrates the point, using the Dow Jones Industrials Average as a market proxy. First, note that market reversals have rarely lasted for more than a year. Even when they've been longer, such reversals typically have been followed by periods of strong performance (there are exceptions, of course).
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In investing, perseverance is the name of the game, and 2022 was a case in point.
A look back at '22
While many of us took a few days off to close out the year, the folks at J.P. Morgan Asset Management worked on end-of-the-year charts and graphs. Here are a few of them.
This is an update of a graph showing the lowest drawdown point of each year (for the S&P 500) and each year's final performance result.
Click Graphic to Enlarge
Did we mention 2022 was a rough year for bonds? Ouch.
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The one-two punch of stock and bond downturns resulted in one of the worst years ever for a 60% stock/40% bond portfolio.
Click Graphic to Enlarge
Whither 2023?
Perhaps J.P. Morgan's charts will be more encouraging a year from now. We can all hope so! But whatever this new year may hold, the task for each of us is to be faithful stewards of the Lord's resources, including in our investing.
We believe SMI's rules-based approach can help you navigate market trends and generate long-term results that will meet your family's needs and enable you to be a generous giver.
Thank you for your trust in SMI in 2022 (and for all the years you may have been with us!). May the Lord richly bless you in the year ahead.
