2022 was a year of some unusual anomalies. Dramatically higher interest rates engineered by the Fed drove one of the worst periods of performance for the bond market in the past 30 years and growth equity multiples collapsed. Prices and wages accelerated at rates not seen for 25 years. A geopolitical fracture within Europe caused the first land war in the continent since 1945, which resulted in a crippling impact on oil and commodity prices. All this painted an ungainly portrait of 2022. Completing the ugly image, Chinese nationalism and their restrictive Covid policy caused serious damage to their economy animating the ﬁnal brush strokes.
Reacting to all that, global equity markets, while lower, were only down 18%. If this is a recession, it hasn’t been deep. If this is a credit cycle, it hasn’t been challenging. The Fed and ECB likely aren’t ﬁnished with restrictive monetary policy, and we probably haven’t seen the lows of all equity markets or credit spreads yet either. I expect 2023 will hold its own challenges.
First, what we do know:
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