2022 was a year of major change for our long-term capital market assumptions. Valuations for both stocks and bonds started 2022 at very high levels, which implied muted future returns. After 2022’s selloff in both, valuations are now more favorable and imply higher future returns for both asset classes.
Cash, which started the year yielding close to zero, was all the way up to a yield of about 4.0% as of this writing in December. The 10-year Treasury started the year with a yield of 1.5%, traded above 4.0% by late 2022 and stood at about 3.8% toward year end. The S&P 500 Index began the year with a forward price-to-earnings valuation ratio of 21 but was trading at a much more reasonable 17 at year end.
Consequently, the 2023 update of our long-term outlook calls for better returns across most asset classes. However, expected lower potential economic growth rates due to aging demographics and a slow-growing labor force still present headwinds for future returns. While off historically high levels, elevated corporate profit margins remain a potential headwind for future stock market returns.
This report is provided for informational and educational purposes only and shall in no event be construed as an offer to sell or a solicitation of an offer to buy any securities or a recommendation for any strategy or to buy, sell, or hold any product. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.
Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed here. The information described herein is taken from sources which we believe to be reliable, but the accuracy and completeness of such information is not guaranteed by us. The opinions expressed herein may be given only such weight as opinions warrant. This Firm, its officers, directors, employees, or members of their families may have positions in the securities mentioned and may make purchases or sales of such securities from time to time in the open market or otherwise and may sell to or buy from customers such securities on a principal basis. This report is the intellectual property of Janney Montgomery Scott LLC (Janney) and may not be reproduced, distributed, or published by any person for any purpose without Janney’s prior written consent.
This presentation has been prepared by Janney Investment Strategy Group (ISG) and is to be used for informational purposes only. In no event should it be construed as a solicitation or offer to purchase or sell a security. Past performance is no guarantee of future performance and future returns are not guaranteed. There are risks associated with investing in stocks such as a loss of original capital or a decrease in the value of your investment. For additional information or questions, please consult with your Financial Advisor.
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