As we move forward into 2023, what happens in financial markets will be determined by the interplay of two primary factors – inflation and economic growth.

For each of the first three quarters of 2022, we spent the opening paragraph of this piece finding new and interesting ways to describe just how bad fixed income performance was, across all sectors and tenors. Yet despite capping one of the worst years for fixed income historically, 4Q22 managed to provide positive total and excess returns.

Three quarters of 2022 are in the books, and it is certainly three quarters fixed income investors would all like to forget. As has become our custom, we present a Market Scorecard to document what has occurred across fixed income markets. The numbers are breathtakingly bad and putting them (once again) in a historical context, the bond vigilantes have delivered on the worst three quarter stretch (for some sectors) ever. The broad corporate market, for example, has seen its worst three quarters in succession since inception of modern corporate indices. The same can be said for the broad US Treasury market. At this point, however, we are beginning to see the light at the end of the tunnel.