Quarterly Market Update 9.30.2022

As of September 30, 2022, the U.S. stock and bond markets were both in bear market territory. The negative performance has been  historic. The news is ugly. The sentiment is very bearish. More bearish than experts can recall.

Inflation, then the actions of the Federal Reserve to address inflation (raising rates and reducing their balance sheet) are slowing the economy. Which is the result the Fed is seeking. Cooling the economy is their solution for inflation. Unfortunately, the slowing economy means unemployment rises.

Market experts are confounded by the market. No one knows what is next. One thing is certain: this is not 2008. If the economy does drop into recession, it should be shallow.  Unlike 2008, when the global financial system was in jeopardy, nothing is broken now. Just higher inflation and interest rates.

It is always darkest before the light. Having experienced several bear markets, the statement is very true with respect to the investment markets. Sentiment is terrible now. Even the most resolute investors are questioning holding their positions.

Again, this is not 2008. But we recovered from 2008. By late 2009 investments fully recovered.

The drops will stop. And the market will recover. The first stages of the recovery could come in big spurts. Those recovery days are crucial to returning your account balance to previous levels. On average, funds earn 50% of their annual return on 5 days. There are a number of technical data points that indicate the worst might be over and that stocks are priced to buy.

On Monday and Tuesday stock and bond markets staged a nice recovery rising 5% over both days. Does this mean the negative action is over? No one knows. We could certainly experience more drops, but Monday and Tuesday are very emblematic of what recovery looks like. It is crucial to stay invested.  

Please contact me with any questions, concerns or for help.