Although markets have made advances over the previous three months, 2022 was still a terrible year for investors as both equities and government bonds posted negative returns. Investors are still concerned about high inflation, slowing GDP growth, and the possibility that an aggressive reaction by central banks would trigger a recession. Even though 2023 is predicted to see a drop in both corporate profitability and economic growth, those negative expectations have been at least partially priced into stocks and bonds at current levels. As a result, if the economy turns out to be more resilient than predicted, it might stimulate the asset market in early 2023. Asian stocks also rose as a result of China relaxing its zero-Covid policy.

For U.S. markets, inflation continues to be the key concern. Though it probably peaked in the third quarter of 2022, inflation will continue to be high due to supply-chain disruptions. It puts pressure on the Fed to put price stability ahead of economic growth, which dims the outlook for corporate profits and asset prices. Stocks began the month of December by giving up some of the gains made in October and November as investor optimism was once again dampened by fears of a recession and worries about rising interest rates. Consumer Discretionary was under pressure, although ten sectors recorded strong growth for the quarter.

In Europe, a challenging winter lies ahead. In December, the European Central Bank (ECB) increased interest rates by 50 basis points, which was a slower rate of increase than its earlier 75 bps increases. Consumer spending and industrial production will be affected negatively by high energy prices, and the ECB will likely continue to tighten monetary policy as a result of persistently high inflation. In October, headline inflation in the eurozone hit 10.6%; however, as the region's economy deteriorates, inflation could decline through 2023. Given that the Russia-Ukraine conflict is still not over and that indicators of industrial production are starting to fall as a result of high energy costs, it is impossible to imagine the region avoiding at least a mild recession. Eurozone shares notched up a strong advance in Q4, outperforming other regions. Gains came from a variety of sectors, notably economically-sensitive areas like energy, financials, industrials and consumer discretionary.