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2022 End of Year Letter

Each year on the last day of trading, the traders on the floor of the New York Stock Exchange close out the
year by singing the song Wait Till The Sun Shines Nellie by Buddy Holly. The basic message of the song –
look to the future, it’s going to be better – seems particularly relevant as we head into 2023 given that
2022 was one of the most difficult years on record for investors. U.S. stocks, as measured by the S&P 500,
were down nearly 20% (excluding dividends) for the year, though they did recover meaningfully from their
October lows during the fourth quarter. Many segments of the market performed even worse, including
the tech-heavy Nasdaq Composite Index (down 33%), the Russell 2000 index of smaller U.S. companies
(down 22%), and emerging market stocks (down 22%). In addition, U.S. bonds, as measured by the
Bloomberg Barclays Aggregate Bond Index, were down 13% for the year. This was (by far) the worst
performance for bonds in well over 50 years. Since 1976, the Bloomberg Aggregate bond index has
generated negative returns only five times (1994, 1999, 2013, 2021 and 2022), and the largest annual
decline prior to this year was 3% in 1994. So, a second consecutive year of declines in bonds including a
13% decline in 2022 is unprecedented. Moreover, during past years in which stocks have been down the
most – 2022, 2008, 2000-2002, 1990 and 1981 – bonds generated positive returns and helped cushion the
impact. That obviously did not happen last year, as bonds were down almost as much as stocks.



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