Broker Check

2022 Q4 Letter to Clients

January 09, 2023

January 9, 2023

Dear clients,

Happy New Year! Goodbye 2022, hello storm of 2023! We hope this letter finds you warm and dry. A New Year brings fresh opportunities and a fresh start.

The year 2022 was an unpleasant one for investors. The Dow Jones Industrial Average (30 stocks) and the broader-based S&P 500 (500 stocks spread across major industries) peaked as the year began (Yahoo Finance data). The S&P 500 hit a record high and high for the year on January 3rd, the first day of trading. That makes 2022 the first year since 1977 the S&P 500 hit its highest point for the year on day one, and the first time the high for the year also marked a record high for the index. After that, we saw the market begin a prolonged collapse, especially for tech stocks and certainly more speculative issues, which saw a nice run-up that we enjoyed in 2021. While stocks were swooning into the summer, CRYPTO had entered its latest winter, and by fall, it was looking like it was headed into an ice age. Then the Sam Bankman-Fried scandal helped drive the currency deeper into shock territory.

Another notable event in 2022 was the new cycle of rising interest rates designed to battle inflation. Understanding what rising interest rates mean to investors is only possible if you have experienced it firsthand for an extended period. A concept hard to wrap your brain around since we have experienced one long decline in interest rates since 1982. Essentially rising rates are bad for stocks. The market went virtually nowhere from 1966-1982. We are not suggesting we are headed for a similar 16-year cycle, but it does give one pause.

According to data from the St. Louis Federal Reserve, the Fed’s response to stubbornly high inflation prompted the fastest series of rate hikes since 1980.

While we would never discount the severe humanitarian crisis that has unfolded for our friends in Europe, market woes were compounded by Russia’s illegal invasion of its neighbor.

The war in Ukraine exacerbated inflation by temporarily sending oil prices much higher and lifting commodities such as wheat.

The allied response designed to punish Russia also trickled into financial markets.

Put another way, the favorable economic fundamentals we were treated to in the 2010’s low-interest rates, low inflation, and modest economic growth shifted dramatically last year.

The economy expanded, but the interest rate and inflation environment overwhelmed any tailwinds from economic and profit growth.

Notably, however, the returns on major market averages varied widely. According to CNBC, the Dow lost 8.8%, while the S&P 500 Index gave up 19.4%, the biggest disparity in over 60 years.

Furthermore, the tech-heavy, growth-heavy Nasdaq stumbled badly amid the high-rate environment.

In hindsight, it’s not surprising, as we’d expect fast-growing firms such as technology to be the most sensitive to higher interest rates. A slowdown in growth in the sector compounded problems.

Key Index Returns




Dow Jones Industrial Average



NASDAQ Composite



S&P 500 Index



Russell 2000 Index



MSCI World ex-USA*



MSCI Emerging Markets*



Bloomberg US Agg Total Return



Source: Wall Street Journal,, MarketWatch, Bloomberg

MTD returns: November 30, 2022-December 30, 2022

YTD returns: December 31, 2021-December 30, 2022

*in US dollars


The disparity between the Dow and the S&P 500 is puzzling at first glance. When looking at just the Dow, one might be tempted to ask, “What bear market?”

Or don’t both indexes cover the same industries? Well, not exactly.

If you look under the hood, the answer surfaces.

“The Dow has done better because it was underweighted in those areas that fell the furthest and overweighted in those areas that did better,” said Sam Stovall, chief investment strategist at CFRA Research.

The Dow also benefitted from its more defensive composition, including a heavier emphasis on health care.

Despite the wide disparity last year, over time, the index performance tends to correlate more closely.

Key numbers

In recent years, uncertainty in equities has aided bonds as investors sought safety in fixed income.

Last year was a notable exception. The yield on the 10-year Treasury bond rose from 1.63% at the beginning of the year to 3.88% by year-end (U.S. Treasury Dept). Bond prices and yields move in opposite directions, which pushes bond prices down.

The drop in bond prices can be traced to the sharp rate hikes from the Federal Reserve.

Inflation is the root of the problem. A year ago, the Fed belatedly recognized that 2021’s s surging inflation wasn’t simply “transitory,” its word of choice at the time. The annual CPI was running at 7.0% in December 2021; it peaked at 9.1% in June and moderated to a still high 7.1% by November, the last available reading according to the U.S. Bureau of Labor Statistics.

The recent slowdown in inflation is welcome, but a couple of months of lower readings aren’t exactly a trend, at least in the Fed’s eyes.

While the Fed appears set to slow the pace of rate increases in 2023, it has signaled that the eventual peak will last longer as it attempts to bring the demand for goods, services, and labor into alignment with the supply of goods, services, and labor.

Of course, the Fed’s weapon of choice—higher interest rates—is a blunt instrument. It does not operate with the precision of a surgeon, and pain won’t be and hasn’t been spread evenly.

Despite chatter in some corners that we are in a recession, a 3.7% jobless rate, which is just below this year’s low of 3.5%, coupled with still-robust job growth, is sending a signal that the economy continues to expand.

However, this year could bring new challenges, and attention has shifted away from inflation to economic performance. A key recession indicator is treasury yields; namely they become inverted when the 2-year note yields more than the 10-year.

The Conference Board’s Leading Economic Index is far from a household name. But it is a closely watched index designed to foreshadow a recession. It’s not a good timing tool, nor should it be used to forecast the depth of a recession. But it has never failed to peak in front of a recession (data back to 1960).

Through November, it has fallen for nine-straight months, according to the Conference Board.

Moreover, more than []two-thirds of the economists at 23 large financial institutions expect the U.S. will slide into recession this year.

Nevertheless, a recession is not a foregone conclusion. This year, a resilient labor market and a sturdy consumer, with borrowing power and some pandemic cash still in the bank, could support economic growth.

That said we, have raised cash across portfolios and invested the cash in relatively short-term treasury instruments and money market vehicles currently yielding 4.828 and 4.36%, respectively. We will continue to look for opportunities as the year unfolds.

Ultimately, we counsel that you must control what you can control. We can’t control the stock market or the economy, and events overseas are out of our control. But we can manage the financial plan.

It’s not set in concrete, and we encourage adjustments as life unfolds. While we caution against making changes simply based on market action, has your tolerance for risk changed considering this year’s volatility? If so, let’s talk.


Personal Notes @ SVWA: 

Tracy and Roberta - took a couple of road trips notably one to Yellowstone in support of the Forever Yellowstone Foundation. We met with friends and family over the holidays and tried desperately not to gain weight but alas Tracy failed to avoid the holiday bulge.

Scott and Erin – had a wonderful holiday season with friends and family. 

Scott Yang and his family - had a nice summer vacation, visiting Las Vegas and Boston. In Boston, we enjoyed the food, the architecture, and the youthful vibe of the college community. Also, we were able to see a baseball game at Fenway Park.

Mo and family - had the most delicious holiday season, made by yours truly. Tandoori Turkey Breast, Garam Masala Sweet Potatoes, Cranberry Chutney, Haricot verts with roasted pistachio, and a Cranberry Apple buckle to finish. For Christmas, I made Menudo, beans, rice, pork, chicken, strawberries n cream, pineapple n raisin tamales. For New Year a bit simpler with crab, oysters, and shrimp. 

Lisa Ozaki - visited her family in Japan and ate delicious food, including soba noodles, Japanese-styled hamburgers, katsudon, and takoyaki. Also, she was shy of about 50 miles to her 1,000 miles goal on her e-bike commuting to work. Next year she will reach 2,000!

Charles Tran - enjoyed the holiday season with family and friends. He took a quarter break from his CFP education but returning to classes starting this month. From the end of December into the new year, he traveled to Sequoia National Park with some friends and went to Los Angeles, where he indulged in great food and experiences. He is looking forward to the New Year!

Katelyn – finished her 3rd semester of college in December. After some tough finals, she was relieved to relax and spend some good holiday time with extended family. Also hoping to make the most of her month and ten-day long winter break, she took road trips to LA and Tahoe with friends, engaging in skiing and exploration. She's looking forward to returning to work and finding new hiking spots around the area!


We trust you've found this review to be educational and helpful. Please contact us if you have any questions or want to discuss any matters.

As always, we are honored and humbled that you have allowed us the opportunity to serve as your financial advisor.

Gratefully yours, 

The Silicon Valley Wealth Advisors Team

Tracy Lasecke, CFP®               Scott Yang, CPA, CFP®           Scott Ponder, MBA, CFP® 

Lisa Ozaki, CFP®                      Monique Ruiz               Charles Tran                 Katelyn Yang



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