January 2022 Market Commentary Update
When Covid-19 hit, the Federal Reserve and the government put over 8 trillion dollars into the economy to stimulate it. This influx created massive inflation, especially in real estate and a significant stock market rally. Now, the federal reserve is saying no more “Free Candy” as they pull back stimulus by way of:
- Higher interest rates over the next 18 months
- Tampering bond-buying by the billions in mortgage-backed securities over the next few months
- Reducing their balance sheet
With the reality of these actions sinking in, the stock markets are now reacting negatively.
The S&P 500 has been flat since September 2, 2021, The Dow since August 12, 2021, and the Nasdaq since July 8, 2021. All gains made between these dates for all three indexes have disappeared, and all three indexes are down year to date.
Our portfolios have been underweighted in equities/stocks and overweighted in fixed income and cash for some time now. Our current goal is to protect our portfolios as much as possible while staying mostly invested. See present allocations below. Trying to time the markets perfectly 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 Number is 74*, which means the Acceptable Six-Month Risk is -16.41%.
- 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 Number is 66*, which means the Acceptable Six-Month Risk is -13.99%.
- 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 Number is 52*, which means the Acceptable Six-Month Risk is -10.10%.
- 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 Number is 44*, which means the Acceptable Six-Month Risk is -8.08%.
- Ultra Conservative Portfolios: never have equity/stock positions but are always in cash and fixed income.
This portfolio’s Risk Number is 37*, which means the Acceptable Six-Month Risk is -6.07%.
*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.
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.
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, please email us or text/call us at 830-609-6986.
CEO, Christian Financial Advisors