812-853-0878  |  800-355-9624

January 1, 2023

Dear Client:

Returns for the major stock indexes in 2022 and the current bond and money market yields are as follows:


Index Year End 2022
Dow Jones Industrial Average    -6.98%
S&P 500    -18.13%


Fixed Income Yields     1 year 2 year 5 year 10 year 30 year
Municipals 2.82% 2.67% 2.56% 2.64% 3.63%
US Treasuries 4.69% 4.43% 4.00% 3.87% 3.96%


Fidelity Government Cash Reserves Money Market Fund 3.91%
Fidelity Money Market Fund Class Premium 4.35%


Happy New Year!  The equity market returns in 2022 were negative for only the third time in 20 years.  The S&P 500 index finished down 18% while the technology heavy NASDAQ closed down 33%.  The Dow Jones Industrial Average performed significantly better yet still down 7% for the year.  Perhaps more notable, the major bond market indexes had their worst year in recorded history, finishing down 13%.  Concurrently, the traditional 60/40 portfolio logged its second-worst year ever (-17.5%).  The markets have continued to make lower highs and lower lows throughout the year despite an October that marked the best month since 1976, and a fourth quarter up by 7%.  This calendar year’s market performance has been nearly the opposite of last year when the market climbed 28% without a single 10% correction.  The value stocks have been the top performers as the major value index funds were down 5%, though significantly better than the overall market.  Any way you look at it, 2022 was not a year to make money in the markets.

The Federal Reserve Bank has (and continues to) put the brakes on the economy by raising interest rates, reducing the money supply, and signaling more to come.  The Fed raised interest rates seven times in 2022 to the highest Fed funds rate since December 2007.  Moreover, they have stopped buying bonds (Quantitative Easing) and are pulling money out of the economy by letting the bonds on their balance sheets mature instead of reinvest.  While we believe we are in a recession and could point to a list of contributing factors and many well-known investors and economists who agree, we also know that recessions are a natural and inevitable part of the business cycle, necessary to rid excesses for future growth.

As we highlighted in our third quarter letter, recessions and business cycles are relatively short-lived for true long-term investors, historically lasting an average of ten months.  Often, by the time the label of recession is announced the markets have bottomed.  We know markets look forward and typically will move before the news, and definitely before the market sentiment might indicate.  In fact, the current consumer and market sentiment indexes, as well as leading economic indicators, are all bullish contrarian measures and compare favorably with the last three recessions.  Also notable, there have been only three instances since 1942 in which markets have declined in consecutive years.

As for 2023, the market is expecting just two more interest rate hikes, one in February and March.  Though it may not seem like it, inflation has declined for the last three months, and we expect it will most likely continue down.  Not only is economic growth slowing, the Fed is committed to lower inflation.  Moreover, supply chains are healing, and the baseline effect (favorable year-over-year comparisons) becomes more significant in April.

At LYNCH & Associates, in line with our founder Tom Lynch’s core beliefs, we will continue to own the best of breed in individual securities, companies with long histories of growth, rising dividends, and predictable performance.  Further, we will continue investing with our value bias in equities as some resolution comes knowing that value investing significantly outperformed growth during both the dot-com era and 2008 recessions.

Within fixed-income options, Treasuries and Municipal bonds, CDs, and money markets have become more attractive.  We expect to allocate more capital into fixed income than in any of the last 15 years even as our most favorable money market rate, available to individuals, now yields 4.35% (the best rate since before the Great Recession in 2008).

We thank you for your continued confidence in LYNCH & Associates.  As always, we welcome you to schedule an appointment to review your financial situation.



Ryan T. Lynch, CFP® ChFC®




Forms ADV Part II and III of the LYNCH & Associates Uniform Application for Investment Advisor Registration and the LYNCH & Associates Code of Ethics are available to all clients at any time.  If you would like to receive a copy, please contact Jennifer Farless at (812) 853-0878 or [email protected].

Office:  10644 Newburgh Road, Newburgh, IN 47630