Year End Market Commentary | Affinity Capital

January 23, 2023

  • After three consecutive quarterly declines, U.S. stocks moved higher in the fourth quarter, but underperformed their international peers. Investors favored value – and cyclical – oriented segments of the market, which outperformed their growth peers by a considerable margin.
  • U.S. bond yields, as represented by the U.S. Aggregate bond Index, appear to have peaked as we approach the end of the Fed’s rate hike cycle, and the markets begin to price in potential cuts down the road.
  • Bond returns were positive in Q4, with lower rated, higher risk bonds posting the highest returns for the quarter.
  • International bonds posted positive returns, mostly due to the drop in the dollar and the accompanying rise in local currencies.
  • Commodities remained volatile amid a pullback in the U.S. dollar, optimism due to eased China Covid restrictions, and global recession concerns, while stabilization in interest rates fostered a rebound in REITS.

Job cuts and jobless claims paint a divergent picture - although the leading indicator of job cuts has picked up noticeably year over year, jobless claims have returned to near 2022 lows, from 650,000 to just over 200,000.

As for inflation, the long-term view suggests that previous surges in inflation were associated with unique events, some of which lasted for years. More active monetary policies have been in place since the early 1980’s, although it is uncertain whether the ultra-aggressive Fed actions can contain inflation in the near term. In the past, higher inflation correlated with weaker markets and economic gains. Goods oriented inflation continues to soften while services prices remain stubbornly sticky. Trends and leading growth indicators, such a money supply growth, are still favorable for a continued easing in price growth; however, the pace of the decline remains unclear.

With most markets hitting bear market territory this year, it is notable that bull markets have been longer in duration and greater in magnitude than bear markets, resulting in gains over time. This bear market has been driven by multiple compression, making valuations look compelling. Yet expected weakness in earnings may limit upside potential for equities. Continued high inflation may indicate that the market is trading gin an uncomfortably expensive zone.

It is important to remember that just five companies account for nearly 20% of the S&P 500’s market cap. While these companies significantly outperformed the overall market in the last two years, they also experienced a sharper pullback during the recent volatility.

At Affinity Capital, we have adopted a cautious approach in the last year, moving to cash easily to avoid significant market risk, investing in Treasury Inflation Protected Securities, and specifically investing in value driven, dividend bearing securities. The impact of dividends as an income generating security on total return is substantial. A hypothetical portfolio with dividend paying stocks invested over the last forty years with dividends reinvested grew sixty three percent over a price appreciation only portfolio.

We have also utilized tax efficient investing, using tax loss harvesting to our advantage with potential savings in taxes over the long run. Sector diversification has been important as variation in sector returns has offered opportunities for tactical tilts.

All of the above commentary about the challenging market this past year is important, and we focus on it every day. It really is one part of your financial picture.

When we sit at the table as part of a team with our client’s professional team, such as tax providers and estate attorneys, we are looking to the future. How will clients plan for their future and that of their families, such as aging parents? How will they sustain assets for a comfortable future? How will they provide for the multi-generational transfer of wealth?

When we adopted the tag line ‘Wealth Management for Life’ it was motivated by the belief that all of these parts are interconnected, and we genuinely enjoy assisting in the strategic vision of your future.

We appreciate the opportunity to collaborate with you and your family and look forward to working with you in the new year and beyond.

Happy New Year!

Please read our more in depth comment ‘Putting a Bow on 2022’ here . 

Signals from the Fed: Inflation, Growth, and What Comes Next

August 22, 2025
It was a Fed-heavy week, with three major developments that matter for markets and the economy. FOMC minutes (July 29–30) — released Wednesday (Aug. 20). The minutes reinforced a data-dependent stance : participants saw continued progress on inflation but noted that risks aren’t one-way, citing pockets of labor-market cooling and the growth impact of tighter financial conditions. Policymakers emphasized flexibility and the need to see inflation moving durably toward 2% before declaring victory. For investors, the takeaway is that the bar for rapid policy shifts remains high, but the Committee is clearly keeping both sides of the mandate in view. Weekly balance sheet (H.4.1) — released Thursday (Aug. 21). The Fed’s weekly statement showed the usual moving pieces: securities holdings, reserve balances, and program usage. While week-to-week changes can be noisy, the release remains a useful pulse on system liquidity and the runoff of the Fed’s portfolio under quantitative tightening . Markets watch aggregate reserves and Treasury General Account flows because they can nudge front-end rates and funding conditions at the margin. Jackson Hole — Chair Powell’s Friday address. At the Kansas City Fed’s annual symposium, Chair Powell underscored that policy decisions will continue to be guided by incoming data . He highlighted the balance between sustaining expansion and finishing the job on inflation , noting tariff-related price pressures and supply-chain considerations among factors being monitored. The message: no preset path, but openness to adjust as evidence accumulates. Historically, Jackson Hole is more about long-term framework and risk management than near-term moves, and that tone held this year. What it means for the days ahead Near-term market drivers will be how inflation and labor data align with the Fed’s “proceed carefully” posture. • If inflation continues to edge lower while growth holds steady, the door stays open to gradual policy easing later this year. • If price pressures re-accelerate—or if hiring slows more sharply than expected—the Fed may extend its wait-and-see approach. Liquidity dynamics from the Fed’s balance sheet runoff will remain a background factor , but the central story is still inflation’s glide path and the durability of demand . Investors should expect choppy trading around key data releases , with markets pricing probabilities rather than certainties. As always, we welcome your questions and are here to support you . At the heart of everything we do is our commitment to “ Wealth Management for Life ”—providing enduring guidance for you and your family’s financial success.

Fed Moves and Market Trends | Affinity Capital

August 6, 2025
Markets entered the week with a boost of optimism, fueled by softer labor data and growing chatter that the Federal Reserve might be leaning toward a rate cut this fall. But that optimism didn’t last long . As the week unfolded, economic uncertainty returned to center stage: fresh concerns about tariffs, underwhelming corporate earnings in some sectors, and signs of consumer fatigue in key parts of the economy tempered the early enthusiasm.

Weekly Market Update: Stability Amid Data and Tariff Jitters | Affinity Capital

July 17, 2025
This week’s stock markets were marked by tight trading ranges, record-setting highs in tech, and a backdrop of macro uncertainty. The S&P 500 (through SPY), Nasdaq (QQQ), and Dow (DIA) eked out modest gains, shrugging off headline volatility tied to Fed independence concerns and escalating tariff threats.