Global stocks rose in the fourth quarter as investors welcomed signs that inflation may have peaked in key markets around the world. Consumer price increases — while still high on a historical basis — moderated in the U.S., Europe and many other economies, fueling speculation that central banks might not raise interest rates as fast or as far as previously thought. Despite the fourth-quarter rally, global stocks posted deep declines for the full year.
Nearly all sectors moved higher in the MSCI All Country World Index during the quarter. Energy, industrials and materials stocks posted strong gains amid hopes that global economic growth would be better than expected in the year ahead. However, pointing to a degree of consumer weakness, the consumer discretionary sector lost about 1%. For the full year, the energy sector was the sole gainer, rising 33%.
Bond markets rallied in the quarter as the U.S. Federal Reserve and the European Central Bank both dialed down the magnitude of interest rate hikes. Fed and ECB officials continued to maintain hawkish tones. But after one of the worst years on record for fixed income investors, lower inflation readings and higher yields helped to generate solid returns in most areas of the bond market. Still, most fixed income sectors posted double-digit declines for 2022.
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