Market Update December 2022 – Friends Back Together for the Holidays?


It’s only right to see old friends back together during the holidays. From a pandemic to generous central bank largess, followed up with a war, and all contributing to dangerously rising inflation, three of the major equity indexes have taken different paths to the same outcome.

Against this background, investors are appropriately introspective as they look to the coming year. Sentiment is cautious, a good way to start 2023 and the uncertainties of the time.   2020 experienced this setup starting with a prevailing environment of caution due to the global COVID outbreak. But through late 2020 and into 2021 caution turned toward optimism as central banks pursued loose monetary policy and capital flowed into risk markets, pushing prices higher. To some degree market activity had the characteristics of “did you buy” rather than “what you bought”. But was it optimism? Or was it the math of the time: monetary stimulus + nearly free capital (i.e., near-zero interest rates) = risk taking?

A clue was evident when the tech-heavy NASDAQ Index (CCMP) significantly outperformed the traditional Dow Jones Industrial Average Index (INDU) over the two years of 2020 and 2021 (as seen in the chart below). While INDU was heavily impacted by traditional large cap sectors, CCMP held a good share of “promising” tech-related companies trading at high multiples (as is shown with each indexes Price/Earnings ratio), some of which had yet to establish reliable profitability.  Yet, during 2020-2021 CCMP more than doubled the return of INDU, but was priced approximately three times per earnings than INDU. Risk taking? Speculation? Cheap money?

But inflation concerns and rising interest rates soon followed and in 2022 investors shied away from more speculative, high P/E companies, turning towards less “expensive” established areas in the markets. The increased cost of money due to rising rates took its toll on the more speculative members of the capital markets and these three indexes have converged to meet again in late 2022. The general market trend towards consistency and profitability has taken the lead, suggesting speculation has receded.   This renewed focus on fundamentals will provide a firmer foundation for the next leg in markets.  As economic uncertainty runs its course, we may already be seeing a clue to the next stage with INDU nearly back to its early January highs while CCMP remains down more than 25% from its previous high.  But first up is the elusive “soft-landing”.  Could the stability represented by INDU be telling us something???

Dow Jones Industrial Index and NASDAQ Composite Converge
S&P 500 Index 
January 2020 – November 2022


Chief Investment Officer



Quantitative Advantage, LLC (QA) is an investment advisor registered with the Securities and Exchange Commission and is a limited liability company organized in the state of Minnesota.  Registration of an investment advisor does not imply any specific level of skill or training. QA Wealth Management is a division of QA.

This information has been prepared by QA, is provided for informational purposes only and does not constitute investment advice. It contains general information, is not suitable for everyone and is subject to change without notice. The views and opinions expressed in this report are solely those of QA and are current as of the date of writing.  While the content is provided in good faith to provide a general commentary of current market factors and conditions, the views and opinions expressed are limited in scope and QA makes no representation or warranty as to the accuracy or completeness of the information provided. Past performance of the global investment markets is not a guarantee of future results.

The index performance results referenced in this report represent past performance and are not a guarantee of future performance. Investment returns and principal value will fluctuate and are subject to market volatility, so that a client’s investment, when sold, may be worth more or less than the original cost. Indices are unmanaged and investors cannot invest directly in an index. An index’s performance does not reflect the deduction of transaction costs, management fees, or other costs which would reduce returns.

The S&P 500 Index is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the New York Stock Exchange or the NASDAQ Stock Market.

Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

Nasdaq Composite Index is a stock market index that consists of the stocks that are listed on the Nasdaq stock exchange. To be included in the index: a stock must be listed exclusively on the Nasdaq market; the stock must be a common stock of an individual company, so preferred stock, exchange traded funds (ETFs), and other types of securities are excluded; American depositary receipts (ADRs), real estate investment trusts (REITs), and shares of limited partnerships are eligible, however.

For more information about QA, its investment programs, fees, and the risks associated with the investments which QA may make or recommend, please review QA’s Form ADV disclosure brochure, which is available at, or upon request from QA’s compliance department by telephone at 866-767-8007, by writing to 10400 Yellow Circle Drive, Suite 303, Minnetonka, MN 55343, or by email to Please review the Form ADV disclosure brochure carefully before or at the time you enter into an agreement with QA.