Sixth Edition

Angus: Putting the current environment into context, can you explain portfolio positioning as we head into 2023?

Amy: The Fed’s rate hiking campaign is slowing both inflation and the economy. Home prices have fallen, stock market valuation multiples have been reduced appreciably, and jobs have been shed within the bloated technology sector.

In sum, excess liquidity injected into the economy during the pandemic is draining from the economy. Yet Fed policy is expected to remain restrictive (higher rates for longer) until core inflation makes more progress towards the Fed’s 2% target – a slow process. Inflation stalling at its current level is a major market concern.

Amy Bush, CFA

Chief Investment Officer

C. Angus Schaal, CFP®

Senior Managing Director

In the bond portion of the portfolio, there are three areas that can offer value in 2023: Treasuries, short-term investment-grade corporate bonds, and agency mortgage-backed securities. We are currently restructuring bond holdings as a result. After decades of low rates, bonds now offer investors more attractive yields and total return.

We expect to remain defensively positioned within stocks as earnings expectations remain murky. To date, earnings and revenue are being enhanced by corporate America’s ability to raise prices for goods and services continually. Losing this ability creates a headwind for future earnings and stock prices. Fortunately, current stock valuations are more reasonable than they were one year ago. Health care, utilities, consumer staples and energy remain areas of emphasis in portfolios.

The Fed is trying to slow inflation while producing a soft landing (no recession) or a shallow recession. We expect to remain nimble as the investment landscape evolves in 2023 to meet the challenges ahead. As we look to the new year, Tandem remains committed to our principles of balance and diversification to combat volatility. Investors should remain fully invested to capitalize on dislocations and opportunities in the next business cycle.


Tandem Wealth Advisors LLC (“Tandem”) is an SEC-registered investment adviser.

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