Monthly Note

It is a scary time.  We have not seen a sustained stock market decline like this since 2008, 14 years ago.  Whether you want to call it a recession, bear market, downturn, or collapse, it doesn’t change the fact that it is scary.

The most recent slide was caused by a surprise uptick in core inflation from the August consumer price index report.  Investors weren’t expecting that.  Combine that with the Fed’s stance on continued rate hikes in the face of inflation and markets dropped again.

It seems like nothing but doom and gloom, but shockingly that is not the whole story.  What makes this situation so strange is that the economy continues to show incredible signs of resilience.  Unemployment numbers are solid.  Consumer spending continues to rise.  The dollar is incredibly strong.  Corporate earnings are off, but nothing that predicts a disaster.  If these things were struggling, inflation wouldn’t be so much of a problem and the Fed wouldn’t need to raise interest rates.  The continued strength of the economy is a problem, something we haven’t seen before.  We needed a little recession to take the pressure off inflation and interest rates, but we haven’t gotten it yet.  The Fed is doing their job to ensure the best long-term future for the economy, but it hurts in the short term.

I can’t tell you what the short-term or long-term future holds, but the global financial crisis in 2008 was the worst economic collapse since the Great Depression, the S&P 500 was down 48% in that drop.  Today, when I wrote this the S&P 500 was at 3843, almost the lowest it’s been all year.  In 2008 it was at 1500, but the catch is, that was the TOP!  That was before it dropped.  Over the past 14 years from the very top of the worst decline in ~80 years, to a low point of the current decline, the market has returned 156%.  From best to worst, still incredible gains.

What happened in the past is little comfort to what’s happening now.  Unfortunately, there is little I can say that will make this feel any better.  The markets could come racing back tomorrow or next spring.  I wish I knew when, but I am confident the US economy and markets are the strongest horse in this race, with the best chance for the future.

If you want to talk through the situation, please call or set an appointment, I would love to talk.

Opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Because of their narrow focus, investments concentrated in certain sectors or industries will be subject to greater volatility and specific risks compared with investing more broadly across many sectors, industries and companies.