Client Newsletter Q3 2022
Dear friends,
When I was younger, my parents would take us on long road trips and after many hours stuck between my older brothers, I would frequently ask, “how much longer?” This is likely the same question you are asking about the current market.
This year has been extremely uncommon as stocks and bonds have gone down significantly, at the same time. Financial professionals often preach that investing retirement portfolios in a 60/40 stock/bond split is the gold standard for optimum risk-adjusted returns. But that hasn’t worked in this current market environment. Some reasons for this include highly aggressive rate increases by the Fed, inflation (rising costs of goods and services), the war in Russia and tensions in China.
Unfortunately, the problems aren’t limited to the US. In fact, the UK, Europe, and Asia are having a harder time in this environment compared to the domestic front. The UK is still trying to adjust to Brexit and Europe is trying to solve their potential energy issues with Russian gas by curbing industrial production. Meanwhile, China continues to hurt their economy by enforcing a COVID zero policy.
There may be more pain ahead, but I am an optimist and see some silver linings. Employment continues to be strong, and the September jobs report beat expectations. Prices are falling for producers, which will eventually pass through to consumers. Last quarter, corporate earnings were up 4.6% and we expect a similar result this earnings season. Lastly, markets historically perform better after midterm elections. While no one can accurately and consistently predict economic events, or time market tops and bottoms, our belief is there will be a rebound in the upcoming months.
As of this writing the S&P 500 is down 25% year to date. It is normal to feel anxiety when the market is down; however, we’ve been through this before. Since our founding in 2006, we've weathered the Great Recession, European Debt Crisis and COVID lockdowns by sticking to our investment strategy. Our process eliminates emotion and focuses on quality and diversification. These tenets will continue to serve us well into the future.
If you have any questions or anticipate changes to your personal financial situation, let’s set up time to talk.
Warm regards,
Investment Advisory services offered through Moonstone Asset Management, Inc. a registered investment adviser
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.