This is not a pretty quarter or year for the markets. The broad Morningstar index is -4.58% for the quarter and- 24.88% for the year. As I noted a few quarters ago the large-cap growth stocks make up the largest part of the index, so when they go up or down the entire market feels it. The Large Cap Growth section of the market is -40.99%, (Time to buy?). We also know on average every 5 years the stock market loses money. It is the price we have to pay for “investing” and receiving better investment results in the long term.
It is interesting to note that with few exceptions there have been no safe harbors. Cash -8%, Gold -8%, Bitcoin -70%, Bonds -15% (depends on the class and type Muni vs Corp vs Govt), so if you wanted to go into the currency market and made a “bet” on the US Dollar rising, you would be very happy; too risky for me. As a reminder, when interest rates go up bonds go down, but the usual result of “stocks go down bonds must rise” is not occurring. This is the time to reflect on how much our accounts have gone up in the last few years and to realize it will do so again. It is just a matter of time! Apple, Google, and Procter & Gamble are not going anywhere, just because the market thinks they are a LOT less than last year really means they were overpriced then and now they are likely underpriced.
The S&P earnings are at 8% so why are the markets down? If you strip out energy the number drops to 1% and the market thinks inflation is going to take it away: -no earnings and you get a down market! As much as I do not want to admit it, I agree. We don’t know if wages drive prices or vice versa, but we do know inflation is caused by too much money circulating in the economy. The Federal Balance Sheet in 2007 was $850 Billion, today it is close to $9 trillion. We cannot continue printing and sending out trillions of dollars. The Federal Reserve has said it will continue to raise interest rates until inflation is under control. The economy will likely take a hit but sit tight since it will recover. As a reminder, the market went up 9% in July alone. If you are worried about the markets give us a call, we have been through this before.
Keith, Nick, Katie, and I appreciate the trust you place in us and we feel that this market will be rough for the next several quarters but will recover. The, “This time it’s different”, is most likely not true. We will have a slowing economy, which will turn into a growing one, and our accounts will recover and be fine! Integra is required to register with the SEC, and Nick deserves great praise as he has spearheaded this rather large undertaking. I should also note the expense of doing so is considerable. The Schwab acquisition of TD Ameritrade will happen next year and the changes we are told, will be very minor ; several will even be very good. We will keep you informed as we learn more. We as a firm are committed to keeping our fees low and will not be making any changes. As usual, call us if your situation has changed.
Yours Truly,
Willis Ashby, President
First Trust
FRED
Morningstar
WSJ
5105 DTC PKWY Ste 316
Greenwood Village, Colorado 80111 United States
5105 DTC PKWY Ste 316
Greenwood Village, Colorado 80111 United States