While 2020 was a year unlike any most investors have seen before, 2022 is serving up its own unique experience for investors. All markets have been on a downward slide for most of the year. Traditionally, we think of stocks and bonds moving in different directions – when one is doing poorly, the other is doing better. This has not been the case in 2022. Bond prices continue to fall as interest rates continue to rise and equity markets have seen a significant correction since January.  

One small piece of encouragement can be found in the bond market. As interest rates increase, bond income is also increasing, especially on the short end of the curve. SVA has made several changes in the core portfolio to take advantage of this income potential by using short term bonds and floating rate funds. While values may be declining broadly, these short-term funds are less sensitive to interest rates which helps stabilize their price, protect investor capital and generate income. 

A notable development is the aggregate bond market, emerging markets and international markets each have negative annualized returns over the last three and five-year periods through 9/30. Bond markets are typically thought of as a safe haven, but these numbers demonstrate there is volatility and risk associated with all types of investments. Looking at year to year returns, any given asset class may be one of the best or worst performers, but when you average the returns you see the net effect of investing in those markets over time. We continue to keep a long-term perspective and trust that everything won’t be awful forever.