February 1st, 2022 Market Commentary

January was a very emotional and speculative month for the markets as day traders reacted aggressively to the Federal Reserve and what it MAY do with interest rates between now and the end of the year and how they could affect the profitability of companies.

The Invesco QQQ Trust (QQQ), which represents NASDAQ stocks, was down over 8.5% in January, with actual stocks like Amazon, Home Depot, TESLA, and NetFlix all down 10% or more. Even the Vanguard Total Bond Market ETF (BND) and iShares Core US Aggregate Bond ETF (AGG), which represent the overall Bond markets, were down approximately 2%.

The following benchmarks, comparable to an equally-weighted moderate portfolio, would have been down approximately 5-6% year-to-date: iShares Core Moderate Allocation ETF (AOM), Vanguard LifeStrategy Moderate Gr Inv, Fidelity® Balanced (FBALX), and the T. Rowe Price Spectrum Moderate Allc (TRPBX). Our Biblically Responsible Moderate Portfolios, net of fees, were on par with these comparable benchmarks for January¹. All Moderate client portfolios have earned an average of 9% per year over the last three calendar years, net of advisory fees¹.

It is essential to reiterate the article “Questions to ask when the markets are down” during times like this. Please see those questions below:

Will I need everything in my diversified investment portfolio for living expenses in the next 1 to 3 years?
Do I have enough funds that are NOT in stocks and equities to last me for the next 3 to 5 years to live on while waiting for the stock portion of my portfolio to recover?
Note: A moderate portfolio has as much as 40% to 60% in fixed income, allowing the portfolio’s stock market portion to recover over time.
Am I smart enough to perfectly time the market by getting out at the perfect time and getting back in at the perfect time? Note: just missing 3-5 days of positive market returns in a month can affect overall performance dramatically.
Do I believe in the short term that people will no longer need technology, healthcare, medicine, utilities, gas, transportation, food, shelter, clothing, and more?
Note: Our well-diversified portfolios consist of these types of companies.
Will I allow “short-term thinking” to get in the way of long-term success?
Should I look at it as a buying opportunity instead of a selling one when the markets are down?
Do great investors like Warren Buffet go with the crowd and run away from the markets when they are correcting, or do they buy these lower-priced stocks?

We have been underweighted in equities/stocks in all our portfolios and overweight in fixed income and cash way before the January downturn. This will allow for great buying opportunities when the time is right. Our current goal is to protect our portfolios as much as possible while staying mostly invested (see below present allocations). Trying to completely time the markets very seldom works.

We are starting to see some good buying opportunities in a few of our funds that are notoriously known for quickly recovering losses when they have been stretched this far from their highs. We will start moving back into our standard equity/stock allocations when we see one, or both, of the following occur:

the sideways to downward trend begins to turn
it makes financial sense to buy at much lower values for the long run.

Do not let short-term negative returns and panicking get in the way of a long-term strategy.

Our Biblically Responsible Portfolio Positions at this time

Aggressive Portfolios: typically 98% to 99% equity/stock positions are presently at 82.5% equity/stock positions with the remainder in cash.
This portfolio’s Risk Number² is 75, which means the Acceptable Six-Month Risk is -16.74%.
Growth Portfolios: typically 80% equity/stock positions are presently at 66% equity/stock positions with the remainder in cash and fixed income.
This portfolio’s Risk Number² is 67, which means the Acceptable Six-Month Risk is -14.28%.
Moderate Portfolios: typically 50% to 60% equity/stock positions are presently ONLY at 36% equity/stock positions with the remainder in cash and fixed income.
This portfolio’s Risk Number² is 53, which means the Acceptable Six-Month Risk is -10.28%.
Conservative Portfolios: typically 20% to 25% equity/stock positions are presently ONLY at 20% equity/stock positions with the remainder in cash and fixed income.
This portfolio’s Risk Number² is 45, which means the Acceptable Six-Month Risk is -8.17%.
Ultra Conservative Portfolios: never have equity/stock positions but are always in cash and fixed income.
This portfolio’s Risk Number² is 37, which means the Acceptable Six-Month Risk is -6.12%.

In closing, rest assured we are consistently monitoring events, the markets, and all our portfolios hourly, daily, and many times into the late evenings as well as very early in the mornings for your benefit as our clients.

Click here to see Our Seven Investment Management Principles.

As a Fiduciary-based firm, we act as your trusted financial advocate for you. We are here to serve you, not the other way around.

If you would like to discuss this, please email us or text/call us at 830-609-6986.

Bob Barber
CEO, Christian Financial Advisors^®

1 Returns for portfolios generated using Panoramix Reporting software. Moderate portfolios for 2019, 2020, and 2021 resulted in 10.41%, 8.06%, and 5.53%, respectively, and YTD returns were -5.11% as of 01/31/2022.
2 All Risk Number volatility percentages are based on 95% Historical Probability for six months and are used by our firm to remain as objective as possible in our professional investment management decisions. These numbers are from Riskalyze, a professional, paid advisor tool we use as a firm.