By this point you likely know that 2022 was not a great year for the markets, consumers, and global economies. There was no place to hide, not even in Government Bonds or Gold. Don’t forget, we have been here before. It seems that every ten or so years we experience a significant market pullback. While the causes of a market decline may vary, a market downturn is still painful.

We encourage you to take the time to read through this update and focus on a simple takeaway. If you get nothing else from this letter we hope that it is this:

“Sit back, relax, the market is likely to recover soon. You will be fine! We’re here for you.” 

In this letter, we will begin by discussing what happened in 2022 in the markets, the economy, and investment portfolios in general. Next, we will address our thoughts on what may be ahead in 2023. We will then conclude with several reminders and/or action items for this coming year.



From stocks to bonds, there was no safe place to hide.  Even cash did not help, with inflation reaching double digits for many items. Let’s take a moment to explore what has been driving the markets this past year.


Tackling Inflation

One of the biggest stories of 2022 was the large increase in the price of goods and services (inflation) as measured by the Consumer Price Index (CPI). Prices on average rose 8.1% over the past year. What caused inflation?  Some would attribute it to the reckless government spending related to COVID, increased wages offered by many companies to attract employees (wages were increased in large part because many workers chose to stay home earning more from COVID Unemployment), and higher fuel costs. With inflation running rampant, the Fed responded to prevent a larger economic crisis.


The Bond Market 

Bonds are normally used to stabilize or balance out portfolios. They can also be used to generate income for a retiree. Bonds are usually considered lower risk, and therefore provide a lower return compared to stocks. However, last year nearly all bonds took a beating, even government bonds.

In response to inflation, the Fed moved to increase interest rates 7 times from 0.0% to 4.25%. This was the fastest and largest rate hike since the early 80’s. When the Fed increases rates, the bond market drops. Nobody in their right mind would want to buy an old bond at a lower interest rate when new bonds being issued have a higher interest rate. The chart below shows how the bond index performed over the past years. Notice, there were very few years when bonds ended the year in negative territory.


The Stock Market

The S&P 500 also had a rough year, dropping 19.4%. Why did the market fall? There are several reasons, but chief among them are the Fed’s attempt to slow down an overheated economy, which was fueled by lower consumer sentiment caused by inflation, higher energy costs, and the Russian invasion of Ukraine.

Investors understandably are concerned when account balances drop. Especially at times like this, it is important to keep things in perspective. The S&P 500 has averaged 11% over the past 6 years (including last year). Market declines are common and should be expected.  Investors made money during the past 32 out of 42 years, and in many cases received double-digit returns.  By adding cash and bonds to a stock portfolio we can potentially reduce volatility, add diversification, and make your investing experience even more enjoyable.  This is why none of our clients are invested solely in the S&P 500 stock market.


When you look at the two charts included above, you can see how investing over time can increase your net worth and provide a retirement income to offset the damages of inflation. Remember your portfolio needs to grow at the same or higher rate as inflation for this to occur.


Balanced Portfolios

 For many retirees (and even for those not yet retired) a Balanced Portfolio, one comprising roughly 60% stocks and 40% bonds, has been a reliable way to achieve better-than-inflation growth while lessening the effects of large market declines. In 2022, the average balanced-type portfolio experienced a very difficult year. By the end of September, these portfolios were on pace to have their worst year in over 100 years. Praise the Lord, things turned around in the last 3 months of the year, helping these portfolios to recover slightly from their lows.



We are actually rather optimistic about this new year. Let’s look at 4 things that we are watching for in 2023. Please remember that only God knows and actually controls the future. The following statements are not guarantees, just our best thoughts on what could happen over the next 12 months.


Inflation Concerns Lessen

As noted above, much of what sparked last year’s sell-off was inflation’s impact on consumers and businesses. The Fed has stated that it is committed to getting inflation back to its target of 2-3%. We are already seeing signs that inflation pressures are starting to ease. Should this continue, we will likely see the Fed stop its cycle of interest rate hikes this year.


Bond Market Becomes More Stable

As the Fed slows/stops its cycle of increasing rates, bond prices are likely to stabilize and start to recover. With interest rates so high and bond prices so low, investing in the bond market is going to become a lot more attractive in 2023.


Recession in 2023

We do expect that the US economy will enter a recession in 2023. Though not likely to be deep or particularly long, a recession may be announced as consumer confidence/spending dries up and unemployment ticks higher. Recessions are called lagging indicators and tell us more about the past than the future. We have seen in the past that when a recession is announced the stock market is well on its way to recovery. But as you know, this is no guarantee.


Stock Market Starts to Recover

If a recession tells us where we have been, the stock market is priced for where we expect to go. In other words, the current price of the stock market reflects investors’ expectations for growth and profits in the future. This is why a company may come out with a wonderful earnings report, showing huge profits, but then the stock price drops. It typically drops because something in the report indicates that the future may not be as rosy as the current quarter.

In 2023, the US stock market may yet hit a new low before beginning its road to recovery. Unlike the COVID market downturn that lasted 3 months, we anticipate that this recovery is going to take a bit longer because the government is not going to be eager to provide aggressive economic stimulus, nor is the Fed likely to lower rates quickly. We do, however, expect a recovery to begin. Investors who are patient are likely to be rewarded for their discipline.

You may recall that last year we shared with you the following chart (next page) showing how the stock market has recovered from every bear market since World War II. While history is no guarantee of future results, it is helpful in guiding our perception of the possible range of outcomes.



As we close this year’s letter, there are several items that we would like to highlight.


Tax Reminders

  1. Don’t forget to get us a copy of your 2022 tax return when it is completed. You can ask your tax preparer to send it to us electronically.
  2. Qualified Charitable Deductions – for our clients who are 70 ½ or older, you may have taken advantage of a QCD by sending all or part of your Required Minimum Distribution (RMD) to your church. This may be a wise move as it can reduce your taxable income. If you have used this strategy, it is important to inform your tax preparer.
  3. Tax Loss Harvesting – We have taken advantage of harvesting losses in 2022 for some of our clients with non-IRA investments. In those cases, we expect our clients will have a tax loss to record on their tax return to help reduce your tax burdens now and possibly for a few years ahead.


Retirement Reminders

  1. Max Out 2022 Roth IRAs – If you have earned income, you can contribute up to 100% of your income or $6,000 ($7,000 for those age 50+) whichever is less. Investors have until the April tax filing deadline to make these contributions. We generally encourage Roth contributions, as they allow for tax-free growth. Contact your Advisor to learn more.
  2. Increase Retirement Account Contributions – The contribution limits for many, if not all, retirement accounts increased for 2023. If you have not already done so, contact your Advisor and/or employee benefits provider to increase your monthly contributions.
  3. RMDs are likely going to be lower this year. Some retirees may be surprised to find that their systematic RMD distribution is lower than last year. This is to be expected, as account values have declined. Reach out to your Advisor to discuss whether your current automatic distribution is sufficient for your cash flow needs.


Stewardship Reminders

  1. Live on less than you earn! For our clients who are still working, maintaining a spending level that is equal to or less than their income is a sign of wisdom. This can be hard when prices are going up all around you. Having a monthly budget can help you make the difficult spending choices needed to make ends meet.
  2. Consider Reducing Account Withdrawals. For our clients who are retired and taking an income from their accounts, market declines are concerning on several levels. If you and your Advisor observe that your accounts have dropped to a level that makes the current withdrawal rate unsustainable, it may be advisable to modify your withdrawals. Fortunately, this has only impacted a very small number of our clients.
  3. Keep Trusting in the Lord. The markets are constantly changing. If we fix our hope on a certain portfolio value, our confidence in the future can be rocked in times of decline. When our hope is fixed on Christ alone, we can face any amount of market uncertainty with the confidence that the Lord will provide.
  4. Check Out “Predictions for 2023: An Interview with Bob Doll” on the Stewardology Podcast website. Bob Doll is a nationally known thought leader and also a believer. You may find his thoughts and predictions to be helpful and encouraging.


Thank you for your continued trust in the Life Financial Group. We are looking forward to working with you this year and in the years to come.


Tim Russell, Roy Russell, Jeremy Ehst, Mark Magruder, Stephen Virkler, Angel Sotomayor

Wealth Managers



Securities and Advisory Services offered through Geneos Wealth Management, Inc. Member FINRA and SIPC