Mid-April 2022 Market Commentary
First Things First
In the last few weeks, we’ve seen a large influx of prospective clients the likes of which we haven’t seen in a long time. In my many years of experience, this is a good and bad thing because this happens every time I have seen a prolonged bear/down market as people start hunting for greener pastures. Contrary to popular opinion the grass is not greener on the other side. We have not lost a single client this year so far but are gaining so many new clients it concerns me. I have seen this happen over and over as people move from Advisor A in a down market to Advisor B and clients from Advisor B move to Advisor A. During times like this be very, very careful of chasing returns. No advisor controls the stock or bond markets.
What a difference one month makes!
The Ukrainian/Russian war continues but is no longer front-page news, gasoline prices are way off their highs and stabilizing, Unemployment is at lows not seen in years as people get back to work post-COVID, leisure travel is returning swiftly, airlines are full and all the cruise lines are at record bookings, and the list goes on.
Inflation! Need I say more? If yes, “too many dollars chasing too few goods”.
The stock market year to date
While the overall stock and bond markets are still down year-to-date, 80-85% of the decline occurred in January. When you look at this on a graph it looks like a 45-degree downward line in January and a 2-3 degree downward line since January.
As I said in last month’s commentary, six months ago, way before the large drop in the markets in January, we thankfully sold off many of our equity/stock positions in our portfolios and held the proceeds in cash and short-term bond positions waiting for a buying opportunity at much lower prices. In February we bought back some of those equities/stock positions at much lower prices than we sold them for just 4-6 months earlier. We still have much more to go to get back to our normal allocation in equities/stock positions in our portfolios but are waiting patiently for a few more buying opportunities. In the long-term, this has the potential to greatly enhance our overall returns but NOT in the short-term until the markets get back to normal. Patience is key in times like this while waiting for the markets to return to normal. Over the past 73 years, the shortest recovery time was three (3) months, and the longest was 25 months. The wise thing is to not panic and stay disciplined.
The keys to investing right now, and as always, are as follows:
- A sound mind
Emotions should have no part in well thought out, long-term investment decisions.
2 Timothy 1:7
For God has not given us a spirit of fear, but of power and of love and of a sound mind.
If you are wise, your wisdom will reward you; if you are a mocker, you alone will suffer.
But the fruit of the Spirit is love, joy, peace, patience, kindness, goodness, faithfulness, gentleness, self-control; against such things there is no law.
There is a time for everything, and a season for every activity under the heavens: a time to be born and a time to die, a time to plant and a time to uproot, a time to kill and a time to heal, a time to tear down and a time to build,
To reiterate what I said in my last commentary, in the next 6-18 months we could see:
- Lower inflation as the Covid stimulus of over 9 trillion dollars from the government and the federal reserve subsides.
- Real Estate at more affordable prices as artificially low-interest rates start returning back to normal with the Federal Reserve raising rates along with stopping their program of buying over a hundred billion dollars a month in mortgage-backed bonds that further created a massive real estate bubble with high liquidity. We are already starting to see this in different parts of the country as long-term 30-year mortgage rates have gone from the low 3% range to the low 5% range. Whatever you do right now, do not buy real estate! In my opinion, we have a bubble bigger than 2008, and I have been a major real estate investor for 37 years with a lot of success. It is a time to be patient and wait for prices to adjust over the next 12-24 months to higher interest rates and a tighter mortgage market. It’s just math.
- Manufacturing in the United States is starting to return back to post-COVID levels.
- The chip shortage that has caused major disruptions in automobile manufacturing along with other businesses should be subsiding in the next 6-18 months.
- The jammed-up supply chain is opening back up and hopefully will return back to normal soon.
- COVID is moving to an endemic status.
- Oil prices are already easing as more supply comes online from the motivation to drill at today’s high prices.
- Markets should return to normal growth rates possibly by the end of this year, or before, but not the kind of growth rates we saw in the last few years from the massive 9+ trillion dollars of artificial stimulus the government and federal reserve provided.
- Hopefully, an end will come soon to the Ukrainian/Russian War. The stock markets do not really care which side wins, it just doesn’t like the uncertainty. However, as Christians, we do care and should pray earnestly for the Ukrainians and provide support in any way we can to fight tyranny.
To see two very good charts on staying invested during down markets CLICK HERE.
In closing, if you have still not seen the webinar Shawn and I did online in February I would encourage you to do so by CLICKING HERE.
As always, 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.
CEO, Christian Financial Advisors®
CCO, Christian Financial Advisors®