Rinse and Repeat

As we enter the final weeks of the quarter, the stock and bond markets are in a full-fledged, panicked decline. Since the beginning of the year…

• The major stock indexes are experiencing losses of 16-30%.

• The US Treasury bond market has lost 11-22% of its value, depending on the maturities.

• Many ‘high growth’ equities are suffering 90-95% declines in prices.

These losses are extraordinary, a symptom of the markets’ digestion of the various global and domestic crises and headline news, and we may not have hit bottom.

With large cash positions, our client portfolios continue to enjoy a low-risk view from the sidelines while we wait for what is sure to be significantly discounted prices on high quality securities in the coming months.

In the meantime, the Federal Reserve is aggressively raising rates to stop the runaway train that is inflation while global economies (including the U.S) are dramatically slowing. In the coming months, we believe the Fed will be faced with both declining GDP and dissipating inflation which will allow them to pause, or possibly end their current tightening cycle. The markets will likely anticipate the economic recovery following this action and will rally strongly in response.

But then the Fed will begin to cut rates again….rinse and repeat…

Those with cash must remain patient during these difficult times, we are positioned to reap the rewards.