We still have one business day left in the year but I don’t think I am too early to do a quick review of 2022.

As I review my notebooks for this recap, it is a bit astounding all of the things that happened.

January

Markets hit their highs January 2 and then down from there.

For the month, S&P 500 down 5.8%. DJIA down 4.5%. NASDAQ down 11%. The US markets have the worst January since 2008.

The TSX, after a 2021 outperformance, was only down .59% due to its commodity exposure.

Elizabeth Holmes of Theranos fraud fame is charged leading to questions of how much due diligence was done by investors in this company. Cover below is from 2014.

February

Russia invades the Ukraine and oil shoots up 8.5% that day.

Headline inflation numbers are the highest since 1982 when annualized. The war exacerbates fears of inflation.

For the month, S&P 500 down 3%. DJIA down 3.3%. NASDAQ down 12%. TSX up .13% for the month.

March

Stocks rebound. S&P 500 up 3.7%. DJIA up 2.5%. NASDAQ up 3.5%. TSX up 3.62%.

US announces releasing 1 million barrels of oil from reserves which relieves pressure on supplies.

Fed hikes rate 25 bps and this is the first rate hike in 3 years and they communicate that more will follow.

Bank of Canada raises rates 25 bps.

Starbucks announces second price increase in six months and customers don’t blink. This lets you know about the pricing power of a good product.

Many stocks are at 52 week lows.

April

Elon Musk agrees to buy Twitter for $14bn. Legal wrangling means that this deal takes months to finalize.

Inflation hits an annualized 8.5% which is the highest reading since 1981. 1981 was also the last time that I tried to feather my hair.

Fed signals a 50 bps hike.

Bank of Canada raises rates 50 bps.

Netflix posts its first quarterly net subscriber decline since 2007.

Crude oil goes below $100 a barrel after the IEA announces tapping into its reserves.

Gazprom (Russian oil company) halts shipments to Poland and Bulgaria and Russia retreats from Kyiv.

Fidelity announces that they will allow investors to hold bitcoin in retirement accounts.

May

S&P 500 falls into bear market territory (down 20% from high) but rallies back to end the month flat.

Gas price at the pumps is highest ever.

Sweden and Finland apply to join NATO.

Bank of Canada raises rates for the first of 7 times in 2022. Real estate starts to feel impact of rising rate concerns.

June

The overriding theme for investors continues to be tightening monetary policy.

Fed raises rates another 75 bps which is the largest single increase in 28 years. Ex-Japan, all central banks are raising rates.

Bonds are on pace to have their worst ever single year performance.

Bear market rally retraces 50% of 2022 losses in the US then gives gains back.

Bank of Canada raises rates 50 bps.

Second half of the year

July

Going back to 1788, US treasuries have their worst first half of a year.

NASDAQ also has its worst first half of year.

US GDP contracts .9% which is a technical recession.

Questions are raised about policy makers ability to control inflation which seems to stem from supply chain issues and energy prices – as well as from the money they poured into the system.

Fed hikes rates an unprecedented 75 bps for the second time in two months. Fed chair Powell indicates pace may slow.

Bank of Canada raises rates 1%.

UK and Italy starting to show political pressures and their leaders resign.

Earnings come into focus with Q2 earnings having a hard time keeping up with 2021’s higher earnings growth.

S&P 500 spends 100 days below the 200 day moving average which a bad technical analysis signal.

Crypto struggles as ‘investors’ are desperate to make withdrawals.

Stocks move higher except for China which is a laggard with their strict Covid restrictions.

August

Stocks, on hopes of a slowing Fed rate hike cycle, rally in the first half of the month.

Powell then stops the party by saying that the policy will remain tight for “some time” and inevitably lead to “some pain” for households and stocks. Many investors wish he would “stop talking”.

Stocks have a weak second half to the month as I am away on holiday. Probably just a coincidence.

September

Liz Truss, the new UK leader wants to cut taxes into inflation and the currency markets let their feelings known by removing her from office in just 6 weeks. Must be a record.

Fed hikes rates another 75 bps.

Eurozone inflation hits 10%.

Bank of Canada raises rates 75 bps.

G7 countries agree to a price cap on Russian oil limiting a key source of Russian revenue (they are still buying Russian oil in September?)

Bonds that were under 1% for five year terms in 2020 are now yielding over 3%.

US currency increased vs other currencies because they start earlier and are more aggressive in raising rates.

Queen Elizabeth passes away.

October

We start the fourth quarter with a stock market rebound.

Dow is up 14% and this is the largest monthly gain since 1976. This happens as earnings fall short of Wall St expectations.

Fed is still on a mission and fighting them is a losing battle.

GIC rates are the same rate at 1, 2, 3, 4, or 5 years.

Bank of Canada raises rates 50 bps.

Job growth is high which spooks markets because it may signal more rate hikes. This is when good news does not equal good news.

Narrative of a Fed pause / pivot continues.

November

First time the markets have back-to-back monthly gains this year.

US election is top of mind and the big red wave of Republican dominance fails to materialize.

Another 75 bps Fed rate hike.

Another 50 bps Bank of Canada rate hike.

Stocks act like they are expecting a Fed rate cut in second half of 2023.

Crypto woes continue as the largest exchange, FTX, faces insolvency questions. Sam Bankman-Fried tries to reassure investors. He is not successful as the firm implodes under investor redemption pressure. FTX, once valued at $32bn, files for bankruptcy. Questions are once again raised about how much due diligence could possibly have been done by large investors.

December

The above mentioned Sam Bankman-Fried is arrested and charged in what may be one of the largest frauds in history. Forbes need to review some of their magazine cover choices (above is November 2021).

Economy is once again back in focus.

US jobs reports point to a strong underlying economy.

Yield curve inverts and continues to invert as I write this.

I am seeing one year GICs yielding 5%.

Growing recession threat also aligns with evidence of slowing inflation.

Big question as we end the year – will there be a soft or hard landing for the economy?

Conclusion

There is a Chinese quote “May you live in interesting times”. I think we are.

The bank of Canada raised rates 7 times in 2022. 0.5% was the prime rate in January and is 4.25% now.

As much as things change, others stay the same. The successful investor does not change a plan that does not need changing. Owning good companies and not exiting them at the wrong time will reap bountiful rewards to the patient investor.

Here’s to a Happy New Year!

J. Todd Kennedy, CIM, FCSI

Senior Portfolio Manager

613-566-4582

toddkennedy.ca