Year-end tax planning is more important than usual because it occurs concurrently with a turning point in U.S. tax policy. For the first time in 40 years, taxes on income and wealth transfers are headed higher.
The new year has gotten off to a rocky start. During the fourth quarter, we communicated that we anticipated greater volatility in 2022 and today we have it in spades. U.S. inflation remains the culprit with year-over-year increases in the Consumer Price Index of 6.9% in November and 7.1% in December, the highest levels in over 30 years. In our view, the volatility we are experiencing is linked to expectations that interest rates will rise faster than previously expected. While our risk discipline has caused us to make several portfolio adjustments, today we remain constructive on stocks over the year as a whole. Our current view is the precipitous decline is a temporary overreaction, as markets acknowledge the path forward will be more challenging than investors previously expected.
