ECONOMIC COMMENT AND MARKET OUTLOOK
In contrast to the relative tranquility that characterized financial markets throughout the previous year, 2022 ushered in a period of turbulence for equity and fixed income markets around the globe. Here in the US, the S&P 500 declined by 18.1%, and the Bloomberg US Aggregate Bond Index declined by 13.0%, representing the biggest decline in the fixed income market in decades. While COVID waves, supply chain difficulties, and Russia’s invasion of Ukraine all contributed to the difficult period, the primary culprit for the markets’ declines was aggressive monetary policy intervention from global central banks to combat inflation. These elevated levels of inflation represented a very concerning dynamic for both consumers and investors and catalyzed an aggressive shift in the Federal Reserve’s policy, which moved suddenly from providing pandemic-related stimulus to fighting inflation via rapid and large hikes in short-term interest rates. Now that the Fed has raised interest rates by 425 basis points in a year, investors are apprehensive about an economic slowdown and the possibility of a recession. At Fayez Sarofim & Co., while we acknowledge these challenges and risks in the short-term, our conviction in the opportunities for long-term investors remains robust. We expect our portfolio companies to weather difficult periods of time and to emerge in an even stronger position to capitalize on their growth prospects. Our firm’s 64-year history in a variety of market environments underlies that optimism for the long-term.
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The above commentaries do not constitute an offer of any securities or investment advisory services. Fayez Sarofim & Co. does not represent that the information contained in the commentaries is accurate, true or complete, makes no warranty, express or implied, regarding the information herein and shall not be liable for any losses, damages, costs or expenses relating to its adequacy, accuracy, truth, completeness or use. Each commentary is subject to a more complete description and does not contain all of the information necessary to make an investment decision.
The volatility of any indices referenced in the commentaries may be materially different from that of Fayez Sarofim & Co.’s products. In addition, Fayez Sarofim & Co.’s holdings may differ significantly from the securities that comprise any highlighted indices.
Any projections, market outlooks or estimates expressed in the provided letters are forward looking statements and are based on certain assumptions. Such projections, outlooks and assumptions should not be construed to be indicative of the actual events that will occur and do not constitute investment advice. Opinions and information included in the commentaries were current opinions and information only as of the date thereof or as of the date indicated, and are subject to change without notice. Additionally, while information presented in the commentaries is believed to be accurate as of the date written and/or derived from sources which Fayez Sarofim & Co. believes to be reliable, Fayez Sarofim & Co. disclaims any and all liability as to the completeness or accuracy of the information contained therein.