This Week in Review:

Limping to 2022’s Close

The latest pandemic scare is another reminder that we won’t be especially sad to see 2022 finally sunset... As we enter 2023, we are optimistic that the worst could be behind us and opportunities and better values will prevail in the year ahead.

Polaris Investment Team |


Stock markets limped toward the year’s close as traders grappled with the effects of China’s rapid reversal of its draconian COVID-19 restrictions. While welcome from a human rights and global supply chain perspective, the end of the nation’s strict “zero-COVID” policy has sparked outbreaks across the country and prompted fears that the situation could trigger a new variant of the virus.

The latest pandemic scare is another reminder that we won’t be especially sad to see 2022 finally sunset. Entering Thursday’s trading session, with just two days to go, the Dow Jones Industrial Average was down 9.5% for the year—better than both the tech-led S&P 500 (which is off 21%) and the formerly high-flying NASDAQ Composite (down 35%). Bear markets are the reality checks that investors must face from time to time, and 2022’s will go down in the history books as a particularly brutal one, with bonds providing no protection from losses. As we enter 2023, we are optimistic that the worst could be behind us and opportunities and better values will prevail in the year ahead.

Here’s what else we’re watching as we celebrate the holiday season:

  • Inflation eased for the fifth consecutive month in November, resulting in the smallest year-over-year increase since October 2021: 5.5% according to the personal consumption expenditures (PCE) index—the Federal Reserve’s preferred inflation gauge. While the central bank’s persistent worries about wage growth won’t be assuaged by this particular report, it’s nevertheless a promising sign that price gains are slowing.
  • The housing market’s slump continued in November, with home prices sliding for the fifth straight month, according to the National Association of Realtors. Higher mortgage rates remain a fierce headwind as fewer would-be buyers can afford to get their foot in the door. By some measures, the situation is as severe as it was during the great financial crisis of 2007–2009, though that’s possibly part of the Fed’s calculus as it beats back inflation.
  • Several news outlets noted that the five worst trading days of 2022 were responsible for knocking the S&P 500 down 18% this year—about 95% of its total loss for the year. What was left unsaid was that the five best days generated a gain of 19%. It’s yet another reason to ignore those who believe you can time the market. Instead, remain focused on the big picture where portfolios are concerned.

Chart of the Week: What Happens After a Down Year for Stocks?

Negative years in the stock market can feel like an endless drag. It’s easy to lose hope in this market environment. But as the legendary Warren Buffett quote goes: “Be fearful when others are greedy and greedy when others are fearful.” With so much fear, is it time to heed this advice?

Our chart of the week looks at forward returns in the S&P 500 after a down year. The results may surprise you! The team at Polaris pulled data from the past 50-plus years of the S&P 500 and two items jumped out at us.

First, down years are not uncommon. In fact, since 1971, 20% of years delivered negative returns. Second, forward-looking returns after a down year in the markets are a testament to Buffett’s philosophy.

Just look at 1-, 3- and 5-year returns after a negative year. The numbers speak for themselves.

We encourage our investors to look beyond negative news cycles and tough times. Focusing on long-term investment goals and financial plans, staying the course and relying on trusted wealth management professionals to help navigate complex markets is the best recipe for financial success.

Secure Act 2.0 and Your Retirement

Three years after the Secure Act introduced major updates to the U.S. retirement system, more modifications are on the way today courtesy of Secure 2.0. Some of the new legislative rules won’t take effect immediately, but there’s a lot to unpack that we’ll be covering in more depth in the coming weeks. For now, here are some of the most important takeaways and how you may be affected.

  1.  Required Minimum Distribution (RMD) Age Increases

    The headline grabber: Starting in 2023, the RMD age will increase from 72 to 73, and in 2033 it will rise to 75. Additionally, the penalty for a missed or incorrect RMD will fall from 50% of the amount not withdrawn to 25% (and to as low as 10% if the taxpayer corrects their mistake quickly).
  2. Bigger Catch-Up Contributions

    Currently, anyone over age 50 can direct an extra $6,500 annually to their 401(k). But per Secure 2.0, anyone age 60 to 63 will be able to sock away $10,000 in catch-up contributions in 2025. What’s more, those catch-up amounts will be adjusted for inflation.
  3. More 401(k) Matching Options

    Beginning in 2024, if an employee is making student loan payments, their employer can choose to match those payments with contributions to the individual’s 401(k).
  4. Added 529 Flexibility

    Secure 2.0 creates an additional off-ramp for unused 529 money. The bill permits a rollover to a Roth IRA from a 529 if certain conditions are met. It appears that $35,000 will be the lifetime limit for rollovers and the 529 must be established for at least 15 years to qualify. Finally, beneficiaries of the 529 must move the money over to their own Roth IRA.

We’ll be providing additional detail on these and other retirement saving provisions as we move into the new year.

Looking Ahead

Markets and Polaris Wealth’s offices will be closed Monday in observance of the new year. As we begin 2023, we’ll be looking over new data on manufacturing and the service sector, vehicle sales, job openings and quits, the December unemployment rate, and the minutes from the Federal Reserve meeting earlier this month.

As always, please visit for our timely and ongoing wealth management commentary. In the meantime, all of us at Polaris Wealth wish you a safe, sound and prosperous future, and a bright new year.

If you’d like to learn more about our tactical or fundamental strategies, please contact our team at 800-268-9046 or

Please note: This update was prepared on Friday, December 30, 2022, prior to the market’s close.

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