With 2022 In The Rearview Mirror, What’s Next?

We made it. For investors, 2022 was the most challenging year since the 2008 financial crisis. The stock market was a rollercoaster, bombarded with high inflation, historical interest rate hikes, war in Ukraine, high commodity prices, and an assortment of other challenges. With 2022 behind us, can we look forward to a better year for the markets in 2023?

Just how bad was 2022? The S&P 500 ended the year down 19.44%, with the Dow Jones Industrial Average (DJIA) down 8.78% and the NASDAQ down a whopping 33.1%. The declines and volatility have led to anxiety for many investors, most especially those who are retired and living on a fixed income. To make matters worse, the cost of living has increased exponentially. Here are three things we recommend focusing on as we move forward into 2023.

Stay On Track

Outside of a couple of years, 2009-2021 were great years in terms of stock market growth. This was despite beginning 2009 in the midst of the worst financial crisis since the Great Depression and the Coronavirus Pandemic forcing a severe market downturn beginning in late February 2020. After a year like 2022, it is extremely important to revisit your risk tolerance.

  • Did you think about selling completely out of the market at some point during the year?
  • Did you lose sleep worrying about your investment accounts?

If you answered yes to either of these questions, it is important to sit down with your financial advisor and review your previous risk tolerance scale and consider adjusting for the future. Keep in mind that downturns are normal and market upturns typically last much longer.

Get Back On a Budget

With the rapid rise in inflation, it was easy to get off budget last year. Prices for food, energy, consumer goods, and many other sectors increased dramatically, forcing many consumers to consider alternatives. Inflation in 2022 reached levels not seen since the early 1980’s. The chart below shows examples of how inflation affected different areas within the economy. This data was collected and published by the U.S. Department of Labor on December 13, 2022. It is a year-over-year comparison from November 2021 through November 2022.

Food at Home 12%
Meats, Poultry, Fish, and Eggs 6.8%
Dairy and Related Products 16.4%
Fruits and Vegetables 9.7%
Food Away from Home 8.5%
Full-Service Meals and Snacks 9%
Limited-Service Meals and Snacks 6.7%
Energy 13.1%
Fuel Oil 65.7%
Gasoline 10.1%
Energy Services 14.2%
Electricity 13.7%
Natural Gas 15.5%
Transportation Services 14.2%
Motor Vehicle Maintenance and Repair 11.7%
Motor Vehicle Insurance 13.4%
Airline Fare 36%
Other Less Food and Energy 6%
New Vehicles 7.2%
Apparel 3.6%
Alcoholic Beverages 5.5%
Tobacco/Smoking Products 6.3%

*Source: U.S. Bureau of Labor Statistics’ Consumer Price Index published December 13, 2022

Even more interesting was the increase of Food at Home, which increased 12% compared to just 8.5% for Food Away from Home. Suffice it to say, we are all paying more for goods and services than we were just a short time ago.
It is important to ensure you and your family have a budget and stick to it. Take time to review expenses over the last three months. Find ways where you can save on or possibly eliminate certain expenses. Make a chart of your wants versus your needs. These small steps can make a big difference over time. Having excess cash on hand allows you to invest more money for longterm growth, or…

Pay Off Debt

If you have student loans, car payments, credit card debt, or any other types of debt that is not a mortgage on your home, work towards paying it off. One of the biggest obstacles to retirement we see is debt. While we believe certain types of debt can be used constructively to build wealth, consumer debt generally drains bank accounts and can put a strain on personal finances. Use your budget to get these loans paid off as quickly as possible. Once these debts are paid off, we do recommend paying extra towards your home mortgage. It is always a best practice to get out of debt as quickly as possible. According to the Federal Reserve Bank of New York, total household debt increased by $351 billion to $16.51 trillion in the third quarter of 2022. The increase in credit card balances on a year-over-year basis is the largest in more than 20 years (1). This is not good for American consumers, and we must find a way to get these debts paid off.

It’s a New Year. It’s a Fresh Start

You’re Doing Great


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Investing involves risk including loss of principal. No strategy assures success or protects against loss.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

W. Blake Branham
LPL Financial Advisor
1034 Broad Street Camden, SC 29020
Tel: 803-272-0700
Email: blake.branham@lumensc.com
Securities and Financial Planning offered through LPL Financial, a Registered Investment
Advisor, Member FINRA/SIPC