January 24, 2022
I think it is important to communicate to you during volatile markets in case you are feeling anxious about the declines in the US stock market indices since the start of 2022.
Declining markets often cause anxiety, and I am not immune to this feeling. Nobody (including me) likes to see their portfolio value decline.
However, we stick with our investment plan for the long term, and despite inflation and Federal Reserve policy uncertainty, I remain constructive on equity markets as a whole.
Some observations:
The market seems to be reflecting more of the uncertainty of outcomes we described at the beginning of the month. So, we are not surprised by these market declines.
We reduced risk in our portfolios at the beginning of the month because we felt this uncertainty wasn’t fully appreciated.
The fact that the market is now reflecting more uncertainty (higher volatility and lower prices), makes us more positive on the countries, sectors, and companies we believe will produce long term growth. The prices of many assets have changed considerably since the beginning of the year.
Although uncertainty remains, we will be looking to marginally increase our preferred allocations and reduce short term treasury holdings.
Prices have become more attractive for many of the long term plays we believe will create investment growth in the long term.
One further thought:
This is not a “buy the dip” mantra or a reliance on what you may have heard called the “Fed put”. I have little expectation that the Fed will look to rescue the market. The Fed, in our opinion, will remove monetary accommodation, despite market volatility.
I suspect that the Fed is slightly more comfortable that prices of many highly speculative assets and companies (gambling) have shown that prices go down as well as up.
However, even if the Fed hikes rates by 100bp in 2022, monetary policy will remain very loose. Real interest rates will likely remain negative.
Holding cash for long periods (in our view) will likely continue to erode your purchasing power.
Please email me if you have any questions.
If you are particularly anxious, I would really like to know about it so I can better appreciate your point of view.
Thanks for your trust as always.
Joe
Joseph Cardello, Principal
August Wealth Advisors, LLC
51 Riverside Avenue, First Floor
Westport, CT 06880
Direct (916) 461-9451 toll free (800) 985-9477
Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA August Wealth Advisors.
Trading instructions sent via email, fax or voicemail will not be honored. There is no assurance that these messages can be retrieved on a timely basis, nor is there any sure method of confirming the customers identity.
The information contained in this email message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. No reader should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence. Investing in the bond market is subject to risks, including market, interest rate, issuer credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies is impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed.
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but August Wealth Advisors makes no representation as to their timeliness, accuracy, or completeness. The opinions in this material are for general information only and are not intended to provide specific investment advice or recommendations for any individual.
Comments