🔥🔥 Wrapping up 2022 🔥🔥

The Sandbox Daily (12.23.2022)

Welcome, Sandbox friends.

Today’s Daily discusses the 2022 calendar year and a brief recap to snapshot the week in markets.

IMPORTANT NOTE: The Sandbox Daily will be off for the holidays and will return on Tuesday, January 3rd.

With that, let’s dig in.

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Markets in review

EQUITIES: S&P 500 +0.59% | Dow +0.53% | Russell 2000 +0.39% | Nasdaq 100 +0.27%

FIXED INCOME: Barclays Agg Bond -0.35% | High Yield +0.26% | 2yr UST  4.327% | 10yr UST  3.751%

COMMODITIES: Brent Crude +3.69% to $83.97/barrel. Gold +0.61% to $1,806.2/oz.

BITCOIN: -0.10% to $16,790

US DOLLAR INDEX: -0.11% to 104.322

CBOE EQUITY PUT/CALL RATIO: 1.35

VIX: -5.01% to 20.87

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Editor’s note

Reflecting on 2022 and thinking about what to write in our final message of the year, countless ideas volleyed back and forth in my head – producing many different narratives that ended in a million different places – so I asked for some help from ChatGPT on how to get started; here is what the artificial intelligence model suggested:

Onwards…

2022 has been a rollercoaster year.

On the one hand, we have much to be grateful for in life: family to share our most intimate moments, friends to laugh with, food on the table, a roof above our head, moments of professional and/or personal growth, and so forth.

On the other hand, and perhaps more relevant to the scope and purpose of this newsletter, the markets have been an absolute disaster. The good news? We all made it. We survived! We survived one of the worst stock markets in history. What’s more, one must go back over 40 years to find a market in which equities and fixed income both had double digit drops.

Every new year is a blank page, a chance to start fresh with new ideas and new energy. Of course, January 1st isn’t actually any more different from December 31st than December 31st was from December 30th. But the collective time we all spend away from the daily routine during the holidays is an important physical, mental, and emotional reset. Time for new goals, new perspectives, and new edges.

It’s an absolute joy to write this market newsletter. Understanding what drives financial markets is a humbling exercise. Hopefully, we’ve delivered timely and informative content to your inbox Monday through Friday that you enjoy consuming. Time is our most precious asset, and I’m grateful for the time we’ve shared together. E-mails, text messages, and phone notifications ping our attention nodes seemingly every minute, constantly distracting us from being present in the moment – so THANK YOU for carving a few minutes out of your day to spend with us. We are deeply grateful.

Please, please, please hop in the comments section below and share any thoughts or feedback. What did you love? What do you want more of? What content can we make better?

Also, please feel free to share our newsletter with family, friends, and professional acquaintances that you feel would benefit from The Sandbox Daily – our growth is purely organic from recommendations and word-of-mouth – so we greatly appreciate your support!

Cheers for a wonderful holiday season and we will see you in 2023.

Blake Millard, CFA

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Wrapping Up 2022

We launched The Sandbox Daily on the Substack platform on July 19th. Let’s run through our short history together.

Total Posts: 108

Number of Charts Explained: 838

Most Common Topics The Sandbox Daily Covered (in descending order): inflation, interest rates, stocks, volatility, technicals, the U.S. dollar, and investor sentiment; all other categories were distinctly in the distance

Major Events of 2022 (not exhaustive): Russia launches ground war in Ukraine, inflation isn’t transitory, gas prices spike, Supreme Court overturns Roe v Wade, central banks around the world synchronously raise interest rates, the Red Wave that wasn’t, student loan forgiveness, death of Queen Elizabeth II, 8.7% 2023 Social Security COLA adjustment, Feds raid Mar-a-Lago, crypto enters crypto winter, and Taylor Swift broke Ticketmaster

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The week in review

Stocks: The major markets finished mostly lower this week as market participants remain concerned about the economic and profits landscape.  Investors have been thwarted by the Federal Reserve’s pushback to a potential pivot, given easing economic conditions.  Moreover, according to the latest Bank of America flows report, global equity outflows totaled a record $41.9 billion in the week to December 21, as investors likely partook in tax loss harvesting.

Investors looking for a year-end rally were disappointed, however the “Santa Claus Rally” officially started today and finishes on Wednesday, January 4th. The Santa Claus Rally generates headlines across financial media due to the historically strong market returns during this relatively short timeframe. The S&P 500 has generated average returns of +1.3% during the Santa Claus Rally period, compared to only a +0.2% average return for all rolling seven-day returns.

Bonds: The Bloomberg Aggregate Bond Index finished the week lower as yields increased. In addition, high-yield corporate bonds, as tracked by the Bloomberg High Yield index, finished the week lower. Treasury yields have been inching higher, including the policy-sensitive two-year note. Furthermore, the 2-/10-year Treasury yield curve spread remains inverted as does the 3-month/10-year Treasury yield curve spread, both indicating a recession may be on the horizon.

The Bloomberg Aggregate Index (Agg) has seen a sharp decline in spreads since October.  The Agg’s OAS peaked at 69 bps (0.69%) in October, and has tightened to 52 bps (0.52%) today as rate and credit markets have broadly rallied after two cooler-than-expected inflation prints.

Commodities: Oil finished the week higher while natural gas prices sold off this week. Milder-than-expected weather in Europe caused this week’s selloff in natural gas given a volatile year for the commodity.  The major metals, including gold, silver, and copper finished the week higher.

Source: Dwyer Strategy, LPL Research

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That’s all for today.

Blake

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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle.  We are committed to delivering high-quality and timely content to help investors make sense of capital markets.

Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily.