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“Weathering the Storm”
We have been in the middle of an unavoidable squall, which keeps showing glimpses of calmer waters, but then pulls us back into the eye of the storm. However, it appears that the conditions may be starting to break, and we just need to make our way through it. We will be looking for opportunities, but sometimes the best strategy is to wait for the storm to clear. We certainly don’t want to drop anchor (go to cash and lock in current levels), but we also want to be patient before raising the sails (rebalance into more risk) …
“Waiting on the world to change…””
The first half of 2022 saw inflation at 40-year highs, the Federal Reserve tightening monetary policy at the most aggressive pace in recent history, an ongoing war in Ukraine, lingering supply chain problems, and massive pessimism in the markets. The results were the worst start to a year for the stock market in 52 years and the biggest selloff in the history of the bond market! The good news is that much of the underlying fundamental data has remained promising and signals relief in the second half of this year. So…in our best John Mayer voice, “we keep on waiting, waiting on the world to change”
“Searching for clarity in bizarre times”
Will inflation ever moderate? How many interest rate hikes are in store? To what extent will GDP growth slow? Are stocks in for a down year? How is the war in Ukraine affecting markets? Lately it seems like there are more questions than answers, but unusual times call for a thoughtful framework in plotting the path forward. Although there has been a multitude of bizarre factors coming into play, the view through our lens has only changed a little. We still hold the same year-end targets; however, the path appears to have changed...
“2022: A muted kind of year”
Prepare for “meh”….. Unlike what we have experienced for the last three years, 2022 is likely to be much more muted in terms of economic growth, stock market growth and overall portfolio performance in general. We’re not calling for a recession or even a bear market. But we do think this year will be far more lackluster than recent years with likely a fair bit of choppiness and a greater potential for a routine 10% correction. There are several factors we see contributing to this environment: continued elevated inflation levels, decelerating economic growth and tighter monetary policy from the Federal Reserve are among the chief factors. However, there should still be some bright spots that could bring a little shine…
“Better than a punch in the nose...”
Things aren’t great, but they’re also not that bad. We are optimistic through the end of the year but see clouds forming for 2022. The popular saying of one of our clients comes to mind. He uses this phrase no matter if things are better than expected or not trending in the right direction. And you know what – he’s right! It is better than a punch in the nose….. !