Every year, investing presents its unique challenges. If you recall, back in 2020 we faced lock downs amid a global pandemic. While 2021 saw the economy slowly re-open, but with labor and supply chain shortages. 2022 brought new headwinds, some we haven't seen in over 40 years. Inflation proved to be more resilient than anticipated, with central banks aggressively hiking rates to slow its progress. Geopolitical tensions and the tragic war in Ukraine ignited a humanitarian crisis and disrupted the capital markets. Many assets that entered the year with extended valuations, buckled in the face of elevated inflation. Stocks and bonds suffered significant losses, delivering one of the worst years on record for balanced portfolios.

The turbulence of 2022 now weighs heavily on the investment outlook for 2023, with implications ranging from economic growth, inflation, central bank policy and interest rates to credit quality, earnings, valuations, investor sentiment and other key metrics. As intended, the historic global tightening cycle should rein in inflation, but will likely trigger recessions in the Americas and Europe.
Even as economic growth deteriorates, markets may stabilize in 2023. Higher bond yields offer total return potential, and they could provide portfolios with valuable ballast during a downturn. Equity markets may remain challenged by weaker earnings growth, but stock prices now incorporate a substantial degree of future damage. Precisely because markets are so battered, lower equity valuations and higher bond yields, in our view, mean that investors now enjoy the most attractive entry point for a traditional portfolio in over a decade. Already, market dislocations have appeared that investors can take advantage of. Those with capital to invest can now find the potential for compelling returns across asset classes and risk levels.

So despite, all the doom and gloom there is a reason to welcome the New Year. The contrarian in me can see the potential for stronger markets in 2023, despite the headwinds to growth. As strange as it may sound, markets may stabilize even as the economy worsens in 2023. The global reset in valuations is presenting investors with a broader range of viable options to help achieve their goals. Most importantly, we encourage you to focus on your family's investment objectives by reconfirming your financial goals. We would welcome the opportunity to build and sustain investment solutions that have the potential to reach them.