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A look back at 2022 … and ahead to 2023

A look back at 2022 … and ahead to 2023


2022 was a tumultuous year for investors, to say the least. High inflation, rising interest rates, and concerns affected markets around the world about slowing economic growth in 2023. The S&P 500 dropped -19.4% in 2022, while the Nasdaq and MSCI EAFE fell -33.1% and -16.8%. The S&P/TSX fared slightly better, closing the year at -8.7%.[1]

It’s probably safe to say, most investors won’t be sad to see 2022 go. Here’s a closer look at some of the areas that made their mark in 2022 and will continue to shape the economy in the coming year. 


Cost of living remained stubbornly high throughout the year. Prices in the U.S. peaked at 9.1% in June driven by higher wages, housing, fuel, and food prices compared to 12 months earlier.[2] However, there are signs inflation is softening, and by the middle of 2023, it’s expected to be cut in half. While equities will experience some headwinds in 2023, softening inflation could be a boost to equity prices. 

Interest rates.

The U.S. Federal Reserve (Fed) began its aggressive rate tightening cycle in March in an aim to curb inflation along with many of the world’s major central banks including the Bank of Canada. The Fed indicated it intends to continue to hike rates further in 2023, but there’s a clear sense that they’re close to winding down the cycle. We should expect to stay at peak rates for some time in 2023 to ensure inflation trends towards its target of 2%, however it will take a recessionary environment to move to the next phase of Fed policy—cutting interest rates. 

Russia’s invasion of Ukraine.

Russia’s aggression in Ukraine and its impact on energy and agricultural commodities have caused significant global economic disruption. Russia’s blockades of Ukrainian ports halted grain exports for months, contributing to widespread food scarcity. Much of Europe is scrambling to ensure energy security in the wake of Russia’s cut of gas supplies to the rest of the continent. In the short term, these issues will pose challenges for the European economy.  

China’s reopening.

China’s zero-COVID policy put a damper on the Chinese economy and was a cause of supply chain disruptions over the past couple of years. Recent headlines indicated a relaxation of these policies in Mainland China. While this is encouraging, uncertainties remain for investors. In the coming months, vaccination and fatality rates, healthcare capacity, and government responses to a rise in cases will be signs to monitor.

Recession concerns.

The probability of a recession in 2023 continues to rise as we have yet to see the impacts of higher interest rates. Consumers are dipping into their savings to fund their consumption and are likely to face challenges with higher interest rates. However, a tight labour market and strong wage growth will help the consumer remain resilient. Markets are forward looking, and last year’s performance would have factored a shallow recession. Markets could drop further if we experience a severe global recession, but as of today, those odds remain low. 


What lies ahead?

We’ve often compared investing to a road trip, and there may be some bumpy roads ahead. While perhaps not very reassuring, it’s helpful to remember that market corrections are normal, and that it’s best to remain focused on long-term goals and not let pit stops derail us from our destination. 


As always, if you have any questions about the markets or your investments, we're here to talk. Please do not hesitate to reach out to Diana to book a time to chat with David or Katlin. 

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[1] Bloomberg, as of December 30, 2022

[2] Consumer Price Index Summary – 2022 M05 Results https://www.bls.gov/news.release/cpi.nr0.htm