Mid-March 2022 Market Commentary
The Ukrainian/Russian war, Iran’s missile launch a few days ago, high gasoline prices not seen in 8 years, rampant inflation from over 9 trillion dollars in stimulus packages the last few years, political instability, and extreme volatility in the stock and bond markets. If it all sounds quite concerning, it is and it can be very emotional. However, as Christians, we should never put our faith in man or emotions, but instead in God and his Word. Here is one of my favorite scriptures and I believe it is very applicable for times like this.
Ecclesiastes 3:1-8 There is an appointed time for everything. And there is a time for every matter under heaven—A time to give birth and a time to die; A time to plant and a time to uproot what is planted. A time to kill and a time to heal; A time to tear down and a time to build up. A time to weep and a time to laugh; A time to mourn and a time to dance. A time to throw stones and a time to gather stones. A time to embrace and a time to shun embracing. A time to search and a time to give up as lost; A time to keep and a time to throw away. A time to tear apart and a time to sew together; A time to be silent and a time to speak. A time to love and a time to hate; A time for war and a time for peace.
This scripture reminds us that nothing stands still, life is always in motion and we should not be surprised by wars and bad times as well as times of peace and prosperity.
Oil and Gasoline prices
Over the last week, oil and gas prices have fluctuated by as much as 20-30% from day-to-day putting gasoline prices back to what we were paying at the pump between 2008-2014 before record amounts of oil were discovered through fracking. Now with oil prices once again over $100 a barrel, companies are very motivated to bring more oil online which historically increases supply and drive prices back down. To see a chart of historic oil prices, CLICK HERE. To see a chart of historic gas prices CLICK HERE. Both of these historic charts may surprise you what we were paying for oil and gas just 8-12 years ago, but we forget.
The stock market year to date
With all this news, many well-known companies’ stocks are down 30-50% year to date.
Thankfully six months ago, way before the large drop in the markets, we 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 like now at much lower prices. Recently we bought back many of the equities/stock positions at much lower prices than we sold them for just 4-6 months ago. We still have more than our normal allocation in cash and short-term bonds to buy more before returning to our normal allocation in equities/stock positions in our portfolios. In the long-term, this should greatly enhance our overall returns but NOT in the short-term until the markets get back to normal. Patience is the key in times like this while waiting for the markets to return to normal, which sometimes can be a short period of time, other times possibly as long as 1-3 years. The wise thing is not to panic when markets are resetting which is normal every few years.
What’s possible in the next 6-18 months?
- 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 so much liquidity. 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 it out 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 should return back to normal as covid subsides along with covid unemployment benefits ending.
- 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 should ease as more supply comes online from the motivation to drill at today’s high prices.
- Markets should return to normal growth rates but not the kind of growth rates we saw in the last few years from the massive 9 plus 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.
During times like this, it is important to think of the following questions.
- Will I need absolutely everything in my diversified investment portfolio in the next 1 to 3 years to live on? If not, you’re good.
- 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: Our moderate portfolio has as much as 40 to 60% in fixed income, which allows the stock market portion of the portfolio 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 my well-diversified portfolio in things people use daily like technology, healthcare, medicine, utilities, gas, transportation, food, shelter, clothing, etc. will no longer be needed in the short term?
- Will I allow “short-term thinking” to get in the way of long-term success?
- Should I look at the markets when they are down as a possible buying opportunity instead of a selling one?
- Do great investors like Warren Buffet go with the crowd and run away from the markets when they are correcting or buy more at lower prices?
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 a few weeks ago 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.
If you would like to discuss any of the above, please feel free to respond to this email or text/call us at 830-609-6986.
CEO, Christian Financial Advisors
CCO, Christian Financial Advisors