The Investment Weapons in Your Quiver
The Alone TV series is hands down Cass family favorite show. It follows self-documented daily struggles of 10 individuals dropped off in remote locations to see who can survive the longest and win prize money for last man or woman standing. Locations have included Northern Vancouver Island, British Columbia, Patagonia, Mongolia and areas of the Arctic.
Each contestant is able to bring 10 items with them as they get dropped by helicopter into the season’s chosen location. It is always interesting to see which items are chosen and the different strategies the contestants use to survive the wild. Not only do they endure harsh physical challenges, they do not see any other human life while in their location. (Other than Med Checks from time to time) These are some of the best survivalists in the world showcasing their primitive skills to take on all that nature has to offer.
Along with the land’s natural offerings, the Alone contestants preselect 10 items for their survival “quiver” to help bring them success. Sometimes their spirits are high after finding a meal for a day or just enjoying the beauty that surrounds them. But it is a flat our fight for them not to hit their call button and “tap out” to be picked up. It’s quite inspiring to say the least.
This year, the markets have offered little comfort and it seems that most days have been “gloomy”. The economy and investment environment has certainly made for an urge to “tap out”. But time and again, there has historically been a reprieve in the market once getting through what could be compared to as a “harsh winter”. In the investment management world, we speak of the importance of Asset Allocation. Asset Allocation is simply the distribution of how one’s money is distributed amongst various types of investments. Stocks, Bonds, Real Estate etc. Think of Asset Allocation as your “Investment Quiver” and the specific investments that are dropped into the quiver are your weapons/items for your long-term success.
It has been a struggle for most all assets this year. Bonds are down due to interest rates and Stocks down with the inflation and recessionary fears that we are now experiencing. Real Estate prices are now dropping rapidly.
So where do we go from here? I want to encourage you to watch videos that we put out on a regular basis. I will say that history is certainly on our side as an economy emerges from recession. The average return 1 Year removed from recession is 21%. 3 Years removed from recession average return in market is 49% and after 5 years removed from recession, over 90% average return.
Hang in there, stay the course and know that we are doing our best to have the proper investment weapons/items in your quiver!
Positive Quote:
"Fear not, for I am with you; be not dismayed, for I am your God; I will strengthen you, I will help you, I will uphold you with my righteous right hand."
- Prophet Isaiah (41:10)
Fun Fact:
Our oldest son just turned 11!
The Markets
Second Quarter through June 30, 2022
For the first time since 2015, each of the benchmark indexes lost value for two consecutive quarters. They also posted losses for June, marking three consecutive down months for the tech-heavy Nasdaq, its longest losing streak since 2015. Investors watched for signs of an economic deceleration in the U.S., with inflation continuing to run at multi-decade highs, and monetary policymakers maintaining a firm stance that their priority remains bringing down prices even if it means slowing economic growth. Nevertheless, Wall Street has suffered one of its worst six-month stretches in decades. The S&P 500 is poised for its worst first half since 1962. Ten-year Treasury yields climbed from 2.37% at the beginning of the quarter to over 3.00%. The dollar is on pace for its best quarter since 2016. Consumer spending slowed for the first time this year, possibly indicating that the economy is indeed weakening. Consumer sentiment fell to its lowest level since 2021. Crude oil prices rose marginally in the quarter, spiking at $123.18 per barrel in early June, ultimately settling at around $105.00 by the end of the quarter. Gold prices declined each month of the quarter as investors weighed rising interest rates against fears of a recession. According to AAA, as of June 30, the average price for regular gasoline was $4.857 per gallon, $0.90 less than the previous week but $1.80 per gallon more than than a year ago. As prices for crude oil and gasoline increased, demand waned, helping to pull prices lower. In addition, OPEC+ agreed to increase output in July and August to compensate for the drop in production due to the sanctions placed on Russia.
Equities fell sharply in April as some disappointing earnings data from several mega-cap companies added to investor worries about rising inflation, the war in Ukraine, and the possibility of an economic pullback. The Nasdaq dropped the most since October 2008, falling nearly 24.0% from its peak as it entered bear territory. The S&P 500 notched its worst month since the beginning of the pandemic, dragged lower by heavy losses in communication services, consumer discretionary, and information technology. Bond prices also lagged as yields increased in anticipation of rising interest rates as part of the Federal Reserve's plan to quell inflation. While consumers worried about cost containment and its impact on the economy, one factor helping to drive inflation higher was strong wage growth propelled by a tight labor market. Weekly jobless claims fell to their lowest level since 1970, while the unemployment rate dropped to a pre-pandemic 3.6%. Entering May, Americans remained focused on rising inflation, the ongoing war in Ukraine, lockdowns in China due to rising COVID numbers, and the impact of the Fed's program of fiscal tightening.
May proved to be a month of market swings. Equities lost value for the first three weeks of the month. However, a late rally helped the benchmark indexes close the month relatively flat, with the exception being the tech-heavy Nasdaq, which followed April's sharp declines by falling another 2.0%. Early in the month the Federal Reserve raised interest rates 50 basis points and announced plans to start reducing its balance sheet in June. The Fed's hawkish pronouncements in its effort to curb rising inflation spurred worries of a recession, despite solid economic data from the prior month.
Stocks soured in June as a slowdown in consumer spending (personal consumption expenditures), which accounts for nearly 70% of economic activity, prompted concerns about a recession. The Federal Reserve increased the target range for the federal funds rate 75 basis points, more than expected, as forecasters estimated a 50-basis point rate increase. Despite a surge mid-month, each of the benchmark indexes ended June in the red. Crude oil prices fell in June, the first monthly decrease since November. The dollar advanced, while gold prices slid lower.
Eye on the Month Ahead
Inflation continued to run hot in June, prompting a plan of fiscal tightening from the Federal Reserve, which included a 75-basis point interest rate increase. The Fed meets again in July and is certain to increase interest rates by at least 50 basis points, with the growing likelihood of another 75-basis point jump, particularly since the Fed does not meet again until September. The first estimate of second-quarter gross domestic product is also out in July. The economy retracted 1.5% in the first quarter.
Data sources: Contribution provided by Forefield. Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.
I look forward to continuing to guide clients through 2022 and beyond. If you have a friend or family member that you think would benefit from working with me, please don’t hesitate to make the introduction. Thank you for your trust and business.
