The graph and table above provide return data for major income-oriented asset categories for the month of December 2022 and YTD 2022. Returns for each asset category are based on the returns of the constituent(s) in the Nasdaq HANDLS™ Base Index representing that category. Also included are returns for the Nasdaq 5HANDL™ Index, the Nasdaq 7HANDL™ Index and the Nasdaq 10HANDL™ Index.
Out Like a Lion
Capping a brutal year for income investors, both the equity and fixed-income markets lost ground in December. The Core Large Cap Equity category returned -7.8% while the Core Fixed Income category delivered a -0.8% return. Concerns about inflation and the impact of the Federal Reserve’s tightening policy on future economic growth continued to serve as headwinds for both equities and bonds.
Every income-oriented category lost ground in December, with equity categories generally performing worse than fixed-income categories. Notable laggards included Growth & Income (-6.0%), MLPs (-4.9%) and REITs (-4.9%). Utilities delivered the best returns of all income-oriented categories, but still lost 0.49% for the month.
Among fixed-income categories, Preferreds performed the worst in December, generating a -4.4% return. High Yield Bonds (-1.6%) and Build America Bonds (-0.9%) also underperformed the broader fixed-income markets while Active Fixed Income (-0.6%) outperformed all other fixed-income categories.
With every income-oriented category losing ground in December, the Nasdaq 5HANDL Index returned -3.0% for the month. The Nasdaq 7 HANDL Index, the 1.3x leveraged version of the index, lost 4.0% in December while the Nasdaq 10 HANDL Index, the 2.0x leveraged version of the index, delivered an -6.3% return.
Despite a challenging December, markets generally performed well during the fourth quarter, with the Core Large Cap Equity category returning 2.7% and the Core Fixed Income category delivering a 1.6% return. Preferreds (-3.6%) were the only income-oriented category in the red during the fourth quarter, while the Dividend Equity (13.0%) and Covered Call (10.9%) categories were notable outperformers.
The Nasdaq 5HANDL Index provided a 4.2% return for the fourth quarter, versus returns of 5.1% and 7.0% for the Nasdaq 7 HANDL Index and Nasdaq 10 HANDL Index, respectively.
Income investors can be forgiven for wanting to forget 2022, a year that saw most income-oriented categories lose significant ground in the face of rising interest rates and fears of a potential recession.
The Core Large Cap Equity category lost 27.8% while the Core Fixed Income category enduring one of its worst years in decades, losing 13.1%.
After years of underperforming other income-oriented categories, MLPs rode a resurgent energy market to a whopping 25.6% return for the year. Utilities (1.6%) were the only other category to deliver positive returns in 2022. On the negative side, rising interest rates spelled trouble for REITs, with the category losing 25.0% for the year.
The Nasdaq 5HANDL Index was down 13.1% for the year, versus returns of -17.4% and -27.3% for the Nasdaq 7 HANDL Index and Nasdaq 10 HANDL Index, respectively.
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