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Monthly Market Risk Update: January 2023 [SlideShare]

Posted by Brad McMillan, CFA®, CFP®

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This entry was posted on Jan 18, 2023 10:15:07 AM

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Monthly Market Risk Update My colleague Sam Millette, manager, fixed income on Commonwealth’s Investment Management and Research team, helped me put together this month’s Market Risk Update. Thanks for the assist, Sam! Let’s take a closer look.

Equity markets sold off in December, capping off a turbulent year for investors. The S&P 500 lost 5.76 percent during the month, while the Dow Jones Industrial Average experienced a 4.09 percent drop. The Nasdaq Composite fell 8.67 percent in December. All three indices ended the year with double-digit losses, with the technology-heavy Nasdaq suffering from the largest declines.

Given the uncertainty surrounding inflation and concerns about slowing growth, we have kept the overall market risk level at a red light for now.

View a breakdown of the risks we’re watching in this SlideShare.

 

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Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

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