SFM Observer - December 2022

Glenn Sweeney |

Issued: January 9, 2023

The Dow closed the month of December at 33,147 for a loss of -1,442 points or -4.2%.  A weak close to a difficult year.  For the full year, the Dow lost -8.8%, the S&P 500 lost -19.4% and the tech heavy NASDAQ lost -33.1%.  The NASDAQ and the S&P are where all the popular stocks that did well during the 2019 - 2021 period reside.  Stocks like Apple, Tesla, Amazon, Google and Netflix.  These stocks all fell in 2022 from -25% in the case of Apple to -65% for Tesla.  Since these are large companies with large total values, they pulled down the indices with their big drops in price.  If you took all the stocks in the U.S. and treated them the same (simply average the stock prices), then the market looks much better for last year.  This is why the Dow Jones Industrials only suffered a -8.8% return. Apple is the only stock on the big popular list that is a part of the Dow.  Less popular companies like Chevron and Merck are part of the Dow and had good positive returns in 2022. 

On the other side of the ledger, bonds also had a terrible year losing -13%.  They did not provide the safety buffer to stocks that they normally do in down years.  The good news is bonds are now poised to perform well in 2023 (no guarantee).  The outlook for stocks is less certain in 2023.

Some interesting events from the month just past:

•               GM is requesting permission to operate a robotaxi in San Francisco.  The boxy vehicle does not have a steering wheel or manual controls.  It has two facing bench seats and GM named this vehicle the Origin.  They plan on running the robot taxi during limited hours in a small portion of the city.  If the test goes well, GM plans to expand into cities in Texas and Arizona next year.

•               Apple is working on advanced encryption strategies to protect the data stored on your iPhone and iCloud.  Law enforcement is trying to block the new service because it means Apple would not be able to retrieve customer data stored on the iCloud if served with a court order to do so.  Presently, Apple is able to comply with a search order to access customer data on the iCloud. 

•               Storm damage incurred by your local electricity or natural gas company can end up on your monthly bill for the next thirty years.  Due to the unprecedented amount of storms, floods, wildfires, hurricanes and tornados experienced in the past couple of years, utility companies have spent 10’s of billions of dollars doing repairs.  They cannot afford to do these repairs as a typical operating expense and instead are issuing bonds to pay these bills. The payments due on these bonds are added to your monthly bill as a customer and can amount to a 10% increase or more.  If you live in a disaster prone area, you can expect utility costs to continue to climb long into the future.

•               The housing market continues to decline at a measured pace.  Existing home sales (used homes) declined for the tenth month in a row.  In November 2022, 35% less homes sold then in November 2021.  Part of this is a lack of inventory and part is the doubling of mortgage rates forcing potential buyers out of the market.

We at SFM, wish everyone a healthy and happy 2023 with maybe a dash of prosperity thrown in.  Some gains would be welcomed with open arms!

Thank you for reading this issue of the SFM OBSERVER. 

Until next month,

Glenn Sweeney CFA