Stocks close out 2022 with another loss (though rally into the close) in what has been a difficult year for bullish investors, looking forward to turning the calendar. All three major stock indexes were down on the day, but today’s market action summed up the entire year: Energy was the only S&P sector higher on the day and was the only group in the green for 2022, too (+58% YTD). This would mark the first calendar year on record going back to 1990 that only one S&P 500 sector finished the year with gains, according to Dow Jones Market Data. Utility stocks are next in line, with a decline of -1.9% while the biggest sector decliners were Communications (-38%), Consumer Discretionary (-37%), and both Technology and REITs (-28%). Surging interest rates from the Fed (and global central banks), 40-year high inflation, a Ukraine/Russia conflict, the collapse of crypto assets following FTX bankruptcy, signs of a recession, plunging technology stocks (AMZN, META, GOOGL, TSLA) and higher energy stocks among the top stories of 2022.

After five-straight years of growth outperformance, 2022 turned out to be value’s year: growth is on pace for its worst year vs value ever (value’s best year ever vs growth) using Refinitiv data back to the mid-1990s: With a near 30% loss for the year, the IGX is on pace for its biggest yearly decline since 2008. On the other hand, the IVX is only off 7%. As a result, the IGX/IVX ratio is down nearly 25% this year.

Mortgage rates rose in the last week of 2022, hitting highs above 7% this fall, but fell to 6.42% as of yesterday – well above the 3.11% at the same time last year! When mortgage rates were around 3% at the end of last year, a borrower who bought a $500K home with a 20% down payment could expect to pay $207K in interest on the loan over 30 years – but with a mortgage rate of 6.42%, the borrower would expect to pay nearly $503K in interest over that period!

According to Charlie Bilello, every single city in the Case-Shiller 20-City Index saw a decline in home prices in August, September, and October. The last time all 20 cities were down 3 months in a row: Nov 2008 – Jan 2009. Also, The Fed’s balance sheet was reduced by 2.4% (-$206 billion) in 2022, the first annual decline since 2018. If QT continues at the current pace (-$95 billion/month), we’ll see a further reduction of 13.3% (-$1.14 trillion) in 2023.