Quarterly Small Value ESG Equity Strategy Q4 2022

Q4 performance was generally strong and helped to take at least some of the sting out of a bad year for domestic stocks. Persistent inflation, a hawkish Federal Reserve and a weak economy all combined to make 2022 a period that most equity investors would prefer to forget.

Value stocks were the place to be in Q4 and for the full year, as interest rates remained elevated after rising sharply for the first ten months of 2022, keeping investor time horizons short.

The threat of a weakening economy persists, with the Wall Street consensus putting the odds at 65% for a recession within the next 12 months.  At the same time, valuations, at least for small caps, appear to be discounting a substantial downturn already.