Josh Gottfried New Year Letter

February 02, 2023

Happy New Year.

A few years ago, I read an article about the benefits of expressing gratitude.  This led our family to begin a tradition where we now share our thanks each evening at dinner.  We end with a cheer the kids made up: “Go Gottfried Gratefulness.”  As we begin 2023, I sure am grateful that 2022 is behind us!  Looking forward, I’d like to offer some insights into the economy and investments, and to share a little about our office, and what’s been happening with us.

The Economy

Will next year be better than last year?  Maybe, maybe not.  Each quarter, the Federal Reserve surveys economists from the twenty-three large banks that do business directly with the Fed (Bank of America, Chase, etc.).  In the most recent survey, more than two-thirds predicted an economic recession in either 2023 or 2024.

If the track record of these economists had been strong in the past, that prediction would worry me.  What did they think last year?  They missed it.  They predicted relatively benign investment markets, with a small amount of transient inflation.  (The Philadelphia Fed keeps these records.  Their forecasts in 2020 and 2021 were not even close either.  Inflation was predicted to be 2.2% for each of the past two years.  The actual year-end numbers were 7% and 6.5%.)

It makes sense that they would have been way off, because 2022 was quite unusual.  We rarely see a collection of economic statistics – all occurring in the same year – like the ones we saw in 2022:

  • The economy grew by around 3%
  • Interest rates rose by over 4%
  • Unemployment stayed below 5%
  • Inflation increased above 6%
  • The stock market (S&P 500) fell by 19%

The last time economic, unemployment, inflation, and interest rate numbers all looked similar to those was more than a half century ago, in 1969.

The biggest economic challenge last year was inflation.  The Consumer Price Index (CPI) is released each month.  It helps quantify the inflation rate for us.  CPI shows the prior month and also the trailing 12 months.  For some reason, the 12-month number is reported much more often (and loudly) than the one-month number, even though I think you would agree that today’s inflation is much more important than whatever it was last spring. 

To try to show inflation differently, we created the graph below.  Using the same data, we annualized inflation by the month (blue and orange bars), by the quarter (green line) and semi-annually (red line).  As this graph shows, high inflation (orange bars) began in March 2021 and lasted for 16 months, through June 2022.



In July 2022, inflation was actually negative (small blue bar) for that month, and over the subsequent 5 months inflation has remained fairly low.  So yes, inflation was very high for about a year and a half – but for the past six months it has come back down to normal historical levels. 

When inflation is high, some companies –  utility companies, for example – are not able to keep up.  Most of us in Connecticut are now being asked to pay the price.  If you use Eversource or United Illuminating, rates are going up by 40-50% this month.  If you’re like me, you’ll want to visit and click on “Supplier Rate Finder,” and look at each of the options.  You may be able to save 5 or 10 cents per kwH by locking in a rate with a different supplier.  Doing that could easily save you $25 or $100 or more on your monthly electric bill.  If you live in another state and need help looking at the options, please let us know.  Many other states have similar programs.



Two years ago, almost all asset classes rose.  Stocks, bonds, and real estate all flourished in 2021.  In 2022 that trend inverted, and almost all of the markets fell in unison.  The S&P 500 (U.S. stocks) closed down 19% for the year.  The EAFE index (international stocks) lost 14%.  Barclay’s aggregate index (bonds) lost 13%.  Even home prices started to fall.  It’s rare that stocks, bonds, and real estate all move up and/or down together like that.  In fact, we count on each of them moving independently of the others when we create diversified portfolios for you.

J.P. Morgan sent us the following graph showing annual rates of return of a portfolio invested 60% in stocks and 40% in bonds. It covers the period from 1950 through 2022.  As this graph illustrates, last year was one of only three times (circled in red) in the past 72 years when diversification did not protect investors from downside risk.


This makes sense in hindsight (something that the economic forecasters from the large banks didn’t have).  Throughout 2021, it was common for our advisors to find themselves fielding questions about cryptocurrency, private equity, and newer technology companies.  There was a lot of speculation going on.  Looking back, we now can see that there were bubbles forming in those areas.  Bitcoin and Tech’s bubbles have burst.  The one in private equity hasn’t – yet.

Economic downturns normally unfold over many months, and are usually bookended by leading and lagging indicators that help us see it more clearly.  The stock market is nearly always a leading indicator, and home values are typically a lagging indicator.  I don’t think this time will be different in that regard.

We don’t know yet if the stock market truly bottomed out at the end of September, or if it will fall even further.  What we do know, however, is that on a relative basis, investments look much more attractive now than they did a year ago.  The S&P 500 currently has a price-to-earnings ratio that has decreased by 25%.  Bonds are paying two to three times what they were a year ago.  While the value of our homes may continue to decline this year, the stock and bond markets are both significantly healthier now than they were 12 months ago.


Our Firm

Each year, we try to broaden and deepen our ability to help you, both by adding new team members and by continuing our education -- to increase our expertise.  We want to make sure we can take care of you, and all of our clients, for the rest of your lives.  In 2022, Kevin Blain and Nancy Stillman joined us in Paraplanning roles, adding over 25 years of experience in financial services between them.  We also recently added another Relationship Manager to expand our administrative team.  Advisor Mike Hannon is continuing his education, looking to attain his CFP®/ CERTIFIED FINANCIAL PLANNER™ certification this year , to go with his MBA degree.  I am currently studying at Yale, to add an MBA to my CFP® certification.  Jim Newman, who also holds the CFP® certification, continues to serve as President of the Hartford CFA Society (Chartered Financial Analyst).  One of the core values of GSWM is continuous self-improvement.  We’re all working toward that goal, together, as a team, more than ever.

And finally, back to gratitude.

We try very hard, every day, to provide extraordinary client care.  2022 was a tough year, and the stress level was high – for all of us.  Multiple times during the course of last year, quite a few of you went out of your way to ask us how we were doing.  That meant a lot to all of us.  I am very grateful for the relationships we have with each of you.  Last year it became clearer than ever, that the care and concern goes both ways.  Thank you!

Here’s to a healthy and prosperous 2023,



Joshua B Gottfried, CFP®, AIF®

Gottfried & Somberg Wealth Management, LLC
340 Hebron Avenue
Glastonbury, CT  06033
p. 860.430.9104 x265 

2022 Forbes Best In State Wealth Advisors, created by SHOOK Research.  Honored by Forbes as an elite advisor for the fourth year in a row, the 2022 award was presented in April 2022 based on data gathered from June 2020 to June 2021.  19,640 Advisors were considered, approximately 6,500 Advisors were recognized. Advisors pay a fee to hold out marketing materials. Not indicative of advisor’s future performance. Your experience may vary. Click here for more award information.

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Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results.  All indices are unmanaged and investors cannot invest directly into an index.