News Digest: Fixed income funds report worst annual performance in 2022
January 3, 2023
Fixed income funds, which realized positive returns of 2.82% on average during the fourth quarter of 2022, ended up reporting its worst annual performance in 2022. The October-December quarter numbers made it the first positive quarterly performance of the year and the largest returns since the second quarter of 2020.
However, the outlook could turn positive for 2023. A report by Goldman Sachs predicts that bond yields would surpass stock dividends in 2023 for the first time since the recession of 2008. It said the S&P 500 Index of U.S. stocks has a dividend yield of only about 1.7% and cyclically adjusted earnings yield close to 4%.
The gap in yields between stocks and bonds has tapered considerably since the COVID-19 crisis and is now relatively low. As on end-December 2022, the highest yield of 4.75% was provided by one-year US treasuries, while Global X SuperDivident US ETF DIV lost 2.1% in the same month and 5.29% in annual yields.