“As sure as the spring will follow the winter, prosperity and economic growth will follow recession.”- Bo Bennett

We are in a bear market. A bear market means that the S&P 500 has dropped more than 20% from its recent high. In addition, bonds have been dropping as well. The famed 60/40 stock/bond portfolio has lost 16.6% for the first half of the year. With both stocks and bonds dropping together, the first half of 2022 has been the worst performing market for assets since 1970. On average, our accounts have performed better. We still have a healthy cash position that we will be looking to deploy in promising investments. We thank you for your continued trust in us.

The Federal Reserve is going to continue to raise interest rates. This will slow down the economy. They are doing this on purpose to reduce inflation. The hope is that the Fed will be able to slow down the economy without putting us into a recession. If the Fed is able to engineer a “soft landing”, the market should have a much better second half of the year.

During the pandemic, the personal savings rate in the United States was over 15% for more than a year, with a high of 33% in April 2020. (For reference, the personal savings rate has been below 10% since the 1980’s.) It was hard to spend money when everything was shut down. Those savings are now being spent as restrictions are lifted around the world. With the decrease in savings and expiration of pandemic policies, more workers should return to the workforce. This should cause the unemployment rate to rise- which should be good news for the economy. This will be beneficial by reducing wage inflation which is being passed on to the consumer. Hopefully, businesses will finally be able to hire the workers they need.

We are concerned for the recently retired. Going into retirement at the beginning of a long term, high inflationary environment could put their future quality of life in jeopardy. Additional retirement savings, spending less in retirement, working longer, and lowering expectations will always go a long way to improve the chance of a fruitful retirement. If you are concerned, please call us to help you plan for the future.

Anyone sitting on a cash hoard should now consider adding these funds to your investment account as the “fire sale” on the NYSE will end and recoveries in many equities will be exciting. Cash on the sidelines is also losing purchasing power to rarely seen inflation rates. The average stock fell 30% in the first six months of 2022. Even a partial bounce-back will put us in good shape.

Very truly yours,

Michael Cantlon
Thomas Guyett
Robert Gephart