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The White Mountains of New Hampshire are small, but extremely dangerous mountains, especially in the winter season. Climbers visiting from the world’s taller, drier, and in most cases smoother ranges, often expecting a mini-version of their past climbing experiences, are rather presented with endless rugged bouldering, cold but wet, hypo-thermically-conducive air, and the fiercest winds on earth. New Hampshire’s tiny range is especially equipped to brutalize climbers, introducing a few to their Maker almost every year. The financial markets are equally formidable, identified by savvy investors as “an organism designed to ultimately inflict the maximum amount of pain on the largest number of investors possible”. How might this truth present shrewd contrarians with exceptional opportunities, and where is this phenomenon relevant right now?

Buying a great business at a reasonable price and holding it for a lifetime is probably the surest, and one of the most efficient ways to build wealth. Every other investment is a trade in which one expects to sell their holding in the future to another investor for a higher price. While there are many trading principles which can increase the probability of success, like valuation guidelines, proper position-sizing, and stop-loss orders, the single biggest factor, and, therefore, opportunity, is to buy aggressively when prices are severely depressed, sentiment is at historic lows, and most investors think the sky is about to fall. Investors who possess the courage and good sense to commit their hard-earned capital to quality holdings when there is blood in the streets are often presented with above average returns. What markets seem poised to present such an opportunity in the near future?

• Emerging markets equity prices generally move inversely to the U.S. dollar, which hit a 20 year high in September and is now collapsing. The iShares MSCI Emerging Markets ETF (EEM) broke through its year-long downtrend less than 30 days later,1 and seems poised to appear on Steve Sjuggerud’s “cheap, hated, and in an uptrend” radar device. Keep a tight leash on this one, as a global recession nears, especially punishing to this asset class.

• Cash-gushing U.S. businesses, in particular beaten-down small and midcap stocks, especially those with pricing power, are in high demand AND in cases selling for the lowest valuation in years. Be careful to distinguish a “Forever Stock” purchase from a trade, and be disciplined to establish an exit plan for all trades at the time of purchase. Volatility will likely extend her stay, for so plans High Inflation.

• Not long ago bonds were referred to by the shrewd as an investment offering ‘return free risk’. Today, following their worst year in a century, and given a high probability ‘the Fed’ will be forced to stop raising, and maybe even start cutting interest rates in 2023 by an impending global recession, improves the outlook for bonds considerably. Steer clear of “junk (high yielding corporate) bonds”, as the recession will harshly scrutinize them, and consider instead the longer-end of the high-quality market.

• If you can imagine ‘the Fed’ having to stop raising interest rates, and possibly even having to cut rates and print money, while inflation is still two to three times its desired 2%, and this dynamic occurring while a global supply-chain restructuring unfolds, you can begin to imagine how expensive natural resources might become. Prefer domestic producers, established leaders, and especially royalty companies with strong income streams and capital efficiency. Build your positions in tranches, diversify, and honor your risk tolerance. Have an exit plan or it will have you. No boom lasts forever.

Think about it. Shaun   

“Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.” ~Ecclesiastes 11:2

“Be wise as serpents and innocent as doves.” ~Matthew 10:16

1 YAHOO Finance, “Quote Lookup: EEM”, December 9, 2022

https://finance.yahoo.com/quote/EEM?p=EEM&.tsrc=fin-srch

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy assures success or protects against loss.

Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

I recall from over twenty years ago, while beginning a long hike on the Franconia Range in the White Mountains, my brother and I debating which of his four young children might first ask, “How much farther is it?”, and how soon they might ask it. Focusing on the suffering a mountain climb inflicts can steal the opportunities it also extends to profit from the experience, and the same can be said of an investor’s perspective in a bear market. The climber benefits most by appreciating the wonder of the forest, the danger above tree line, and the beauty of the summit vista, and it helps to remember that every step represents one no longer required to soak one’s feet in the numbing river below. What principles can turn the dreaded bear market into an equally rewarding experience for investors?

The simple decision to enjoy, and benefit from the climb sets the mountaineer to meticulous planning and committed training. The following issues can help any investor think very differently about bear markets, and profit immensely from the opportunities they present:

• The most productive investments are made when prices are low. It will not “feel” right to buy when there’s blood in the streets, so have distinct parameters to make yourself do so.

• Capitulating, or selling stocks near a market bottom to stop the pain, is a catastrophe. Build cash by reducing stock exposure when prices are high by use of sell-limit orders, and by appropriating new contributions to cash.

• Always have an exit plan (specific parameters to sell) on all non-forever holdings from the date of purchase, and follow it judiciously.

• Never part with a forever holding due to emotional pain, or for any reason other than a fundamental change in that holding.

• Never be afraid to buy a great business at a reasonable price, but don’t back up the truck until the market bottom is confirmed.

• Train yourself to get excited when prices are low, and concerned when prices are high. Profit on the fear and greed of others by agreeing with the market’s cyclicality and counter-intuitiveness.

• Profitability comes more reliably from income streams than from appreciation potential; focus on dividends.

• Build a “watch list” of great businesses, the price at which you must own them, and should they fall so far, buy them.

• Heed Warren Buffet’s counsel that investing is like baseball in that you are never forced to swing at a pitch. Never make a purchase due to “Fear of missing out” (FOMO). Be patient when buying. Hunt like an alligator.

• Strictly adhere to proper position sizing. Never allocate more than 5% of your investable assets to a single stock, especially speculative positions.

• Dollar cost average the whole market cycle, preferably from peak to peak. Athletes train in the valley, not on the mountain top. The summit is the reward, not the daily experience. Do the work good investing requires.

• If retired, account for income withdrawals. Never be forced to sell at an unfavorable time to fund withdrawals, especially in a bear market.  

• Learn to gauge the sentiment of others. When conversations tend to include the stock market and investment success, make sure your ‘stops’ are in order; when tales of woe and loss abound, make sure your cash is liquid and your watch list current.

• Understand returns are mostly attributable to asset allocation, as opposed to security selection. Focus on favored, and avoid unfavored industries. Don’t allow yourself to think favorably or unfavorably about the market as a whole, but investigate deeper what is wise to own at any given time.

• Get the highest fixed rate you can on cash savings, especially at decade-high Treasury rates, but keep it liquid, for the bear market bottom may come sooner than you think.

• Keep investment expenses to a minimum. Realize every dollar of expense directly reduces returns, and worse, it compounds that reduction indefinitely!

• If you hire someone to manage your hard-earned savings and investments, make sure it’s a fiduciary who represents your interests alone.

• Enjoy the investment process and never stop learning. Share your profits with those in need, and your knowledge with those eager to learn.

Think about it, Shaun.   

“What the wise man does in the beginning, the fool does in the end.” ~Author unknown

“Investors who buy in stage one of a bull market, when prices are low because of prevailing pessimism, have the potential to earn high returns with little risk; the two prerequisites being money to spend and the nerve to spend it.” ~Howard Marks

“Give a portion to seven, and even to eight, for you don’t know what disaster may happen on earth.” ~Ecclesiastes 11:2

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy assures success or protects against loss. Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

June introduced the first natural bear market in the U.S. since the Great Recession in 2008. The February to March, 2020, covid lockdown-induced bear market qualified by definition, which is a 20% decline from the recent peak, but lacked important characteristics of a traditional bear market, and was anything but natural.

Major bear markets are always accompanied by economic recession; remembering that will help you distinguish a market correction from a more painful and lasting drawdown event. As described in Bob Farrell’s 10 Rules of Investing, the three stages of the bear market are as follows:

• Sharp down

• Reflexive Rebound

• Drawn-out fundamental downtrend

The sharp sell-off occurred from early January through mid-June, interrupted briefly by a relief rally in March, and saw the S&P500 to a 23%, bear market decline. The reflexive rebound played out as an impressive 17.8% summer rally from mid-June through mid-August, conning many talking heads to pound the tables on the new bull market, and has since rolled over. That leaves the drawn-out fundamental downtrend.

The bear market’s final stage consists of two phases: a dramatic, fear-driven sell-off to significant new lows with little interruption, and then a longer, slower, more methodical decline in prices. The investor’s psychological journey begins in disbelief, when the initial sell-off occurs, travels to denial, during the fake recovery, ventures through awakening, when fake recovery’s cloak falls off, breaks the speed limit to fear, when the crash arrives, spends a few days in despondency, during the drawn-out decline, and finishes the journey at capitulation, where it’s illegal to own stocks. Capitulation greatly excites savvy investors, who subscribe to “The Daily Gazette”, but never visit.  

While it’s important to protect our capital with prudent bear market principles, like dollar cost averaging, diversification, honoring stop-loss orders, building a cash position, and favoring quality over potential, it’s also critical that we realize:

• The Fed fears deflation more than inflation, and while we shouldn’t fight the Fed, they will print again, which means stocks will rise again. The bear market will culminate in a fantastic opportunity.  

• A person is smart, but in groups people are dangerous and irrational. Broad capitulation is a gift from the masses which the prudent never refuses. Build cash.

• When a large pile of money is sitting in the corner, Jim Rogers said he always goes over, picks it up, and takes it home with him. Know what you want to own, the ridiculously low price at which you must own it, and make sure you are notified when it happens.

Politicians, the Fed, and the financial media have been lying to you. Recessions and bear markets are not evil, and they are not avoidable. Recessions punish the heavily indebted, which frees up unproductive capital and sends it to productive ends, the non-profitable, which promotes and compensates entrepreneurialism and fiscal restraint, and the under-educated, which trains workers to be useful and productive. It also sets the foundation for sustainable economic growth. Bear markets weed out excess leverage and speculation, and prepare the table for a new and sustainable bull market. The prudent don’t fear these things, they welcome them.

Think about it, Shaun.   

“Be wise as serpents, and harmless as doves.” ~Matthew 10:16

“If you have not been faithful in the unrighteous wealth, who will entrust to you the true riches? You cannot serve God and money.” ~Luke 16:11,13

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy ensures success or protects against loss. Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities.  An investor should consider their ability to continue purchasing through fluctuating price levels.  Such a plan does not assure a profit and does not protect against loss in declining markets.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

The percentage of any wild animal’s time spent searching for food is impressive, a display of planning, exertion, and perseverance which puts even Master Gardeners to shame. The animal is simply not in confusion about the importance of food. Vital resources steadily supplied to producing nations through established distribution channels by way of relatively free trade has been a boon to earthly societies for millennia, but the Covid19 lockdown dismantled the global supply chain, which today is being reconfigured meaningfully. How is the scramble for natural resources suddenly reshaping national policies and international allegiances? How do the technological megatrends discussed last week exacerbate the need for critical resources, and how should it affect your thinking and behavior as an investor?

If the Lord should tarry, effects from the Covid19 lockdown will still be playing out in 100 years. Nations are now forced to align based on the supply of required resources over and above former priorities; for instance, Europe may abandon support of U.S. sanctions against Russia this winter if Putin threatens to withdraw his supply of natural gas via the Nordstream pipeline, a development which would have massive political, economic, and currency implications. Non-producing, importing nations are being squeezed financially by higher prices and the sudden need to increase dollar reserves in preparation for the oncoming global recession. Developing, resource-rich nations, also under pressure to build dollar reserves, are tempted to fund the effort by nationalizing large producers of essential commodities, further reducing global supply, a catastrophic error most recently repeated by Venezuela. Dominant trading nations, like the U.S. and China, are adjusting production and trade policies, spending aggressively, and threatening war over resources perceived to be up for grabs, all in a frantic effort to secure critical supplies for the future. This is a telling landscape, but the opportunity gets even better for investors paying attention to the suddenly most important asset class on earth.

God made everything from nothing, but people are capable only of refashioning existing materials. Globally scalable, disruptive mega-trends, like 3D printing, robotics, electric vehicles, battery technology and renewable energy, are already introducing a new and insatiable demand for specific natural resources, especially the rare earth metals required to mass produce these new technologies. Supply for many essential resources may not exceed demand for decades; coupled with the inflation policies of modern central bankers, the evidence is beginning to suggest we may have recently entered an historic commodity supercycle.

The following factors may help as you consider whether natural resources are something you should own:

• Commodities last crashed from 2011-2020 and are coming off some of the lowest prices in history. Jim Rogers says it’s the only inexpensive asset class in the world today.

• Commodities are risky investments, and are notorious for experiencing huge bubbles and busts. Diversifying modest exposure is critically important.

• Prefer the stocks of profitable, dividend-paying producers to futures contracts, which have high trading costs and are heavily manipulated.

• Never chase prices higher when buying natural resources. Hunt for shares like an alligator, not a cheetah. Wait for recession, when demand is weak, to do most of your buying.

• Have an exit plan at the time of purchase, or at some point in the future you will definitely, woefully regret it.

Think about it, Shaun.

“Give a portion to seven, or even to eight, for you don’t know what disaster may happen on earth” ~Ecclesiastes 11:2

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy ensures success or protects against loss.

Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic and currency instability, and may not be suitable for all investors.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

Hikers venture into the White Mountains of New Hampshire every year adequately prepared to climb in pleasant conditions, sadly never returning to their families. No sailor enters The Clipper Race around the world absent years of intense mental and physical preparation for good reason, and ‘the winds of the White’s’ have no more compassion on those depending on nature’s kindness than ‘the waves of the world’s great seas’. Myriads of retail investors today rely on Wall Street’s highly-touted ‘60/40 Portfolio’, consisting perpetually of 60% stocks and 40% bonds, a system Warren Buffet, Doc Eifrig, and dozens of other famed investors are warning is a trap in the post-Covid world, and a corpse the financial media is scrambling to resurrect. The coming decade in the financial markets is likely to resemble a Canadian winter front in the White’s, a multi-day event famous for claiming the lives of experienced winter mountaineers. What can you do to not only survive, but prosper in the storm?

Profitable investing involves, among other things, committing capital not to developments one believes ‘should’ be playing out, but to those which ‘are’ playing out, or better yet, to those which soon ‘will’ play out. An investment theme is in motion which is capable of turning a potentially ‘lost decade’ into a very profitable affair for those paying attention, one which will transform the way virtually every American interacts with others, travels, makes purchases, and manages their own health. These emerging and disruptive mega-trends are not necessarily favorable for individuals, or even society, but the people and institutions behind them possess both the power and resources to make them happen, and so they will. The same way Amazon devoured the brick and mortar retail world in the past decade, the following emerging technologies will displace and destroy even the largest corporations which refuse to embrace the world’s new way of doing things:

• Robotics

• Artificial Intelligence

• Battery Technology

• Blockchain Technology

• Synthetic Biology

• Electric & Autonomous Vehicles

• Telehealth

• The Metaverse and Augmented/Virtual Reality

• Renewable Energy

• Fintech

• E-Commerce

• 3D Printing

As you consider the above world-altering trends for your own investment portfolio, I would urge you to weigh three things: 1) consider the moral issues at hand, and refrain from violating your conscience, as no amount of money is worthy of that, 2) realize these are all very risky ventures, as all start-ups and developing industries are, and allocate a minute portion of your investable capital to this investment theme, and 3) stay diversified within each new industry, as most competitors won’t survive; virtually none of Amazon’s early competition exists today.

I’ll close with two very exciting concepts: 1) it will not require a large investment in the companies that end up dominating these new market sectors to meaningfully impact your overall rate of return in a decade that will otherwise, at best, be difficult for most investors, and 2) the stock price of nearly every company in every one of these industries has plummeted catastrophically in the recent sell-off, and will likely offer great entry points when the present bear market concludes.

Think about it, Shaun.

“But you, Daniel, shut up the words and seal the book, until the time of the end. Many shall run to and fro, and knowledge shall increase.”  ~Daniel 12:4

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy ensures success or protects against loss. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

All performance referenced is historical and is no guarantee of future results.

Companies mentioned are for informational purposes only.  It should not be considered a solicitation for the purchase or sale of the securities.  Any investment should be consistent with your objectives, time frame and risk tolerance.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

Winter Mountaineering exposes climbers to various risks, some calculable and some incalculable. Calculable risks, like the probability of pursuing an unnavigable route or a slip and fall on steep terrain, can be managed with planning, conditioning, and technical advantage, while incalculable risks, like an avalanche or a crevasse fall, are largely unmanageable and must be accepted by the climber. Investing, like mountaineering, involves numerous proven hazards which must be identified and mitigated, as well as incalculable risks to be acknowledged and accepted. Is investing worth the risk? Why do great investors identify risk management as the indispensable component to successful investing? What are the considerations and methods of studious risk management? 

Famed investor, Doc Eifrig, of Stansberry Research, says “owning the stocks of profitable businesses is the greatest wealth building tool on earth”. Jim Rogers, Warren Buffet, and Jeff Besos would all agree. In a near-zero interest rate, high inflation world, the alternative to having, at minimum, a small amount of stock exposure, and, therefore, assuming the associated risk, is a large guaranteed annual loss in the purchasing power of all savings and investments, the only material measure of your financial worth! Yes, the risk of owning stocks is “worth it”, on certain terms.

Warren Buffet states the two most important rules of investing are 1) Never lose money, and 2) Never forget rule number one. Mr. Buffet strongly recommends that you assume risk, and that you dutifully manage that risk. Stanley Druckenmiller, Steve Sjuggerud, Howard Marks, and other legendary investors identify ‘the avoidance of a catastrophic loss’ as the single most important principle to investing. No mountaineer would disagree, and King Solomon, a wealthy man with much to lose, inferred as much in Ecclesiastes 11:2, when he said, “Give a portion to seven, or even to eight, for you know not what disaster may happen on earth”.

General means of risk management include the following:

• Diversify equity holdings across multiple companies and sectors.

• Dollar cost average into a diversified stock fund constantly.

• Never over-pay for any security.

• Keep leverage on your investments to a minimum.

 It should be understood investment return, and, therefore, risk of loss, is driven primarily by asset allocation (to investment types and industries), not security selection. Consider the following as you formulate your own ‘normal’ risk posture:

• What resources do you have to meet future income needs?

• How adequately will those resources meet the need, given conservative inflation and rate of return assumptions?

• Where are you in the life cycle of inflows and outflows?

• What aspirations do you have that involve spending?

• What is your emotional ability to withstand market volatility?

   *Note that an investor’s risk posture should be based primarily on resources and financial status, not on emotions or sentiment, which, though factored in, must always be scrutinized, and often overruled.

Finally, once the ‘normal’ risk posture is ascertained, decide whether your allocation will remain in the ‘normal’ range throughout the various phases of the market cycle, or whether you will ‘lean’ in one direction (i.e.; offense) or another (i.e.; defense) as these market dynamics play out.¹   

In short, manage risk like a mountaineer! Think about it, Shaun.   

“For God gave us a spirit not of fear, but of power and love and self-control.” ~2Timothy 1:7

1 Oaktree, “Insights Live: Which Way Now? A Conversation with Howard Marks”, August 9, 2022 https://www.oaktreecapital.com/insights/insight-video/market-commentary/insights-live-which-way-now

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. All investing involves risk including the possible loss of principle. No strategy ensures success or protects against loss.

Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price and does not guarantee a profit or against loss of principal.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.

I used to love telling scary ‘bear stories’ to my young and gullible nephews while camping in the woods behind our home, and would often inconspicuously loft rocks into the brush for effect. Jerome Powell is a gifted storyteller; already confounded once by the resiliency of ‘40 year high’ price inflation, Powell is now counting his chickens before they hatch, and so far, Wall Street foolishly believes the fairytale. What comments did the Fed Chair make yesterday which constitute wishful thinking? Why didn’t the bond market buy it? What reveals the spirit of speculation remains in the stock market? What should you do about it?

In yesterday’s FOMC press conference, Chairman Powell said he doesn’t believe the U.S. economy is in recession, doesn’t believe a recession is necessary to bring inflation back into the Fed’s desired range, and future rate hikes will be determined based on monthly data.¹ Powell’s statements suggest the Fed will bring its key short-term lending rate to 3.25%-3.5% by year end, that this series of hikes will be sufficient to tame inflation within months, and that it won’t even require economic contraction. Wow, what a wonderful story! Stock investors cheered the news with a binge-shop, driving the S&P 500 3% higher for the day.²  

No bear ever inhabited the back woods in the days of my storytelling, but convincing my nephews of that fact was nearly impossible once the rocks started landing. It’s likely to require more pain for stock investors to sober up from their excesses of the last decade, and receive Powell’s testimony as the wild notion that it is. How can a man who creates inflation for a living, and yet can’t differentiate between relatively harmless, transient inflation and life-threatening, resilient inflation, have such rare insight into the complex relationship between inflation, interest rates, and the world’s largest economy, while battling a global supply crunch, de-globalization, and war? How can a more indebted U.S. economy than in 2018 handle rates higher than were required to send the financial markets into turmoil that year? Powell didn’t answer these two important questions.

The 10 Year Treasury yield closed down modestly yesterday, while key components of the yield curve remain inverted. An inverted yield curve is the most accurate indication of an oncoming recession, bragging a near perfect track record over the past half century. While sober bond investors were unamused by Powell’s story, frolicky stock investors bid up the prices of profitless, dividend-less growth stocks, suggesting too much stimulus-driven stupor remains on Wall Street, given the hawkish environment we are now in.

In closing, what we know is, 1) we are in a bear market, 2) the fed is aggressively tightening policy, 3) inflation is high, and 4) the unintended consequences of higher interest rates are unknown. Build investable cash, dollar cost average the whole market cycle, stay diversified, favor present streams of income over speculation, favor businesses with pricing power over those with growth potential, and most importantly, watch the storyteller’s actions while listening to his words, it would’ve saved my nephews a great deal of anguish!                  

Think about it, Shaun.   

“The last duty of a central banker is to tell the public the truth.”

~Alan Binder, Federal Reserve Board Vice Chairman

“The Federal Reserve is not currently forecasting a recession.”

~Ben Bernanke, Fed Chairman, January, 2008

1 CNBC, “Full recap of the Federal Reserve’s rate hike and Powell’s market-boosting comments”, July 27, 2022

https://www.cnbc.com/2022/07/27/real-time-updates-of-the-feds-big-rate-decision-and-powells-press-conference.html

2 Yahoo Finance, S&P 500, July 27, 2022 at 4pm

https://finance.yahoo.com/

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy insures success or protects against loss. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price.

https://www.fivestarprofessional.com/spotlights/90982

Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2012/2022 Five Star Wealth Managers.