We Are Almost There!
Hello All,
Here we are again, another year wrapping and I am in shock that it is already almost November. I know I say this every year, but time really flies.
I am writing you all for a few reasons. One, I want to remind everyone of some end-of-the-year housekeeping items, and two, to give you all an outlook on these markets and what we predict through the end of the year (spoiler alert: we are optimistic!)
So, for starters, let’s cover some of necessities before we reach the end of the year:
· If you are age 72 or older, and have not yet taken your 2022 RMD, please contact our office to make sure we get that done before December 31st.
· If you are ANY age, and have an inherited IRA or Inherited Roth IRA, please also contact our office to pull your 2022 RMD if you have not done so already.
· If you have not had a meeting with myself, or another advisor in the office, at all this year, please contact Casey so we can get you on the books. We like to meet with our clients at a minimum of once a year, but we prefer simi-annually.
· As a reminder, if you have moved, changed phone numbers, or got a new email address, please contact our office to let us know so we can update your file on our end, and direct you on how to update it with Schwab. If Schwab does not receive the updated information, your account may be put on a trading freeze, which is not good, for obvious reasons. So, please always call us right away with any changes to personal info.
Now, on to the juicy part. What the heck is happening in the markets? Are we in a recession? What’s going on with inflation and those darn interest rates??
Well, let’s do what we always do and take a step back and take a birds-eye view. We are all aware that the markets are well into correction territory, and depending on how long you’ve been a client, you have probably heard us say “these corrections are good and needed.” However, we are fully aware of the pain and fear these markets incite.
So why are we here? Well, coming out of a pandemic in 2020 (where people were forced to stay home and net spend), and then an unprecedented 2021 (where people were cash rich as eager to spend, but faced supply chain issues -too many dollars chasing too few goods), we came to a screeching halt. Partly because of supply chain issues and partly because of rising interest rates - but primarily because of investor outlook and fears. Since early 2022 we have seen the Fed raise rates rapidly (and probably a little delayed), which has caused us to feel the effects of inflation, but despite those factors, we have still been able to maintain strong fundamentals. Historically speaking, with inflation where it is, we would have seen a much harder hit to the economy, unemployment, consumer spending and overall corporate earnings, but we just haven’t seen that this year.
The truth is, we are in a recession - according to the textbooks at least (2 consecutive quarters of negative GDP). However, because this is not a traditional recession, and we have strong forward looking indicators, we are optimistic going into to Q4 and 2023.
The first reason we are hopeful looking forward is the upcoming election. Without getting into politics, we believe that the anticipated outcome will result in a positive reaction in the markets. Slow moving politics equals a happy market.
Also, with supply chain issues easing, and the holiday season upon us, we anticipate continuing to see corporate earnings performing. Sure, we do have inflation that may make is slightly slower than in years past, but we are all human and will be spending more money over the next 3 months than we have the rest of the year. Consumer spending equals happy markets.
Finally, and possibly the most important, we are optimistic because of our technical indicators. We have seen a decline in the VIX (the index that tracks market volatility) and have seen the market test and retest its lows (this is a good sign).
Also, It was recently brought to our attention that one major technical indicator, the McClellan Oscillator, has reached a number that signals to us that our markets are oversold. The McClellan Oscillator, without getting too technical, is a measure of the money going into the market vs the money going out of the market AND the stocks that are advancing vs declining (breadth), which allows us to have a very broad, birds-eye view of the overall market and therefor predict trends.
Recently, this indicator reached a mark of -15, which at the surface level tells us that the market is oversold and that there is more money leaving the market than joining it, and more stocks losing than winning. However, here is the good news: since 1990, the McClellan Oscillator has dropped below -15 109 times, 100% of those times, stocks were up higher 12 months later, with the average return being 29%! This indicator, coupled with other fundamenals, like consumer spending still up 10% year-over-year, and unemployment still relatively low, indicates a bull market ahead.
So, yes, we are in the middle of a selloff that hurts and is scary, but if we can share any wisdom with you, from our professional standpoint, it would be this: do not let this selloff scare you away. Like we have always preached, we do not sell at the bottom. And now, more than ever, we are confident that that’s exactly where we are- the bottom.
What does that mean for you? Well, if you’re fortunate enough to have extra cash on hand- now is the time to invest it. If not, that’s okay, you hold tight and remember that we (PFS) are here, watching and waiting, and we are confident that we are almost done with this wild ride…at least until the next bear market… because, as we all know, bear markets will always be the price we pay to “play.” This is why we preach high-quality, long-term investing.
If you ever need any extra support or to hear a voice of reason, you can contact us, but know that we are optimistic and confident and that we are almost out of this mess.
So, on that note, I hope you all have a wonderful Halloween next week, and very Happy Thanksgiving next month!
As always, thank you for your endless support, trust and referrals. We are so grateful for all of you.
Stay healthy and safe everyone!
Warmest Regards,
Anna Brockschmidt and the PFS Team
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