If you compare the stock market value from the end of 2019 to the end of 2022, it is amazing to realize that over those three years, the S&P 500 was up 18.8%. Yes, you read this right!!! During those three years, we experienced the entire economic, financial, political and geopolitical world going to hell-in-a-handbasket. And yet, from pre-pandemic to the end of 2022, the market is up 18.8%.
The big story of 2022 is the Federal Reserve’s belated but aggressive efforts to bring inflation under control. The FED has raised rates 16 times in the 13 years since the trough of the Great Financial Crisis (March 9, 2009), 7 of those times occurred in 2022. In 2022, the S&P 500 was down 27% by mid-October but finished the year down 18.1%. Bond prices also fell in response to the rising interest rates.
The unforeseen, as well as the unforeseeable, economic, market, political and geo-political chaos of the past three years demonstrates that the economy can never be consistently forecast nor the market consistently timed. Therefore, the only way to capture the full return of the equity market is to stay consistently invested and ride out each and every temporary decline.
Our core investment strategy these past three years continues to be: Stand fast. Act slowly. Resist the temptation to react to current events.
The burning question of the hour is whether and to what extent the FED will increase interest rates in their zeal to fight inflation and will it tip the economy to recession – if not already there? How this plays out in stock prices in the next twelve months is unknowable. What I do know is that the action of the FED will not affect our investment philosophy.
That said, I strongly believe that whatever it takes to put out the inflation fire will be worth it. Inflation is like a cancer that affects everyone and every aspect of our society. If a recession is the chemotherapy to destroy the cancer, so be it.
Our news feeds, internet, social media and talking heads will call out every market gyration and shriek at every minute financial detail until we are all blue in the face. Yet we are not investing in “the market.” We are investing in companies who are consistently refining their strategies opportunistically to meet the needs and wants of an eight-billion-person world. I like what we own.
As always, plan your cash flow and cash needs to reduce the need to make portfolio changes when it is not in your best interest to do so. If you have questions, please give us a call or send us an email.
If you are a client, as always – and I cannot say it enough – thank you for being our client. It is a genuine privilege to serve you. If you are not a client and would like to talk about our services, please call or email the office.
Wollman Wealth Designs, Inc
Fred Wollman, Founder
JC Niesley, Partner
Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
Securities and advisory services are offered through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRA/SIPC, a broker-dealer and registered investment adviser. Cetera is under separate ownership from any other named entity.
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
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