Invest in Resiliency

The market got off to a rocky start in 2022. Stock market indexes and bond markets alike recorded declines of 5-10% with many blue-chip companies suffering losses greater than 20% during the quarter. Along with the substantial headwinds we discussed in our year-end review, the war in Ukraine has introduced even more uncertainty.

The Federal Reserve’s current plan to dramatically raise interest rates to combat the worst inflation in 40 years is the main reason for the extreme level of fear rocking the capital markets. The Fed’s removal of the massive stimulus that has been driving stocks to record-high prices is now being painfully unwound. The Bloomberg U.S. Aggregate bond index - largely U.S. Treasuries, highly rated corporate bonds, and mortgage-backed securities - was down 6% for the quarter; its biggest quarterly loss since 1980.

With uncertainty and declines almost everywhere you look, what can investors expect for the remainder of the year?

It is highly likely the Federal Reserve will both raise interest rates and drain liquidity from the financial system through “quantitative tightening,” the removal of liquidity from the markets. This will continue to pressure the stock and bond markets in the coming months, fueling more uncertainty.

In response, our Team will continue to create resiliency and solid returns for our clients through our dynamic asset allocation strategy. Currently, this entails high cash positions for our clients, preserving principal while the markets decline. Whether the Fed engineers a “hard” or “soft” landing for the economy, we believe the opportunities for profit will be available to those investors with buying power.

When the markets finally hit bottom, and they will, our clients will be in a perfect position to purchase high-quality investments at rock-bottom prices and ride the markets’ wave back up. In times of uncertainty, invest in resiliency…