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What are the Odds?

Given what a difficult year 2022 proved to be – a highly contentious mid-term election cycle; a tragic war and humanitarian crisis in Eastern Europe; the ongoing impact of Covid 19; historically high inflation and the S&P 500 off 19% (the worst annual return for the benchmark since 2008) and the Bloomberg Barclays Aggregate Index off 15% (the worst annual return in the history of the fixed income benchmark), the less said about last year the better.

So, we will keep this note brief, and make just two broad points: one, the US has endured an incredibly difficult few years, yet, at the risk of being overly dramatic, we are still here and are still the world’s largest and most important economy, still the world’s longest-lived democracy and still – in the words of Abraham Lincoln – “the last best hope of Earth.”

And, as it concerns markets more specifically, 2022 will prove to be just the fifth year in 93 where both US equities and US fixed income produced a negative return (see chart; and if we measure US equities on a total return basis instead of a price return basis, 2022 will prove to be just the fourth year in 93 where both asset classes finished in the red).

Given that inflation is rolling over and that the US Federal Reserve is likely much closer to the end of its rate hiking cycle than the beginning, we think the odds are quite low that risk assets will struggle this year the way they struggled last year. With that said, we wish you and your loved ones a happy, healthy, and prosperous New Year!

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital Investments, LLC, a registered investment advisor. 001-BCI-1/03/2023

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