- October 21, 2022
- Posted by: Terry Jack
- Category: Uncategorized
Market Commentary October 2022
If 2022 had to be summed up in one word, we would pick: volatility. This volatility has reached all corners of the market and has been a head-scratcher at times. Literally every part of the market has been affected by this increase in unpredictability. Bonds, stocks, currencies, precious metals, commodities – everything has been affected. The only market certainty this year is no certainty.
Because of this lack of certainty, we find ourselves playing defense. We believe that: inflation will likely remain stubbornly high, earnings will be hit by the global recession and strong dollar, bonds will have pressure from rising interest rates, the war in the Ukraine will likely heat up and consumer spending (70% of U.S. GDP) will begin to decline more aggressively as Americans digest and recover from a 3-year spending spree – the likes of which we have never seen.
Accordingly, we have increased our already defensive stance within our portfolios. We are limiting duration in our fixed income portfolios to lower risks. Additionally, we are lowering growth stock exposure with a bias toward value and dividend paying stocks to limit fluctuations. Moreover, we have been increasing hedged positions and limiting international allocations thinking this should help maximize returns. We believe that these actions will help limit downside. However, we are not tied to these holdings, and we continue to remain nimble so that we can make changes quicky if circumstances dictate.
Through September 30, 2022, S&P 500 returned -23.8% while the Barclays Aggregate Bond index was down -14.6%. Investors have experienced substantial swings in the stock market in prior periods, however, bonds have seldom if ever have performed so poorly after three calendar quarters. A portfolio of 40% stocks (S&P 500) and 60% bonds (Aggregate Bond Index) thru September 30 would have returned -18% thus far in 2022.
These are scary times in the markets. If you have any questions or if you would like to talk about your investments, please give us a call. We thank you for your patience and trust as we go through this period of market volatility and uncertainty.