The Markets and Vitamin C

To our clients and associates,

Unless you live under a rock, you know well the impact of inflation on the costs of daily living – gas, groceries, eating out and anything arriving via the supply chain.

As I write this, the market has entered bear market territory – defined as a 20% drop from its recent record high. The Catch-22 we find ourselves in is that traditionally, increasing exposure to bonds was a way to mitigate the effects of a downward stock market. Unfortunately, high inflation and rising interest rates combine to form Kryptonite when it comes to the bond market. So we have both stocks and bonds trailing downward at the same time.

As always, we take advantage of a downturn to rebalance any accounts or portfolios that are more than five percentage points away from our allocation targets. This worked well when COVID first impacted the markets, which dramatically altered the composition of portfolios everywhere. Our discipline allowed us to sell bonds high and buy stocks low.

It's an historical fact that when the stock market turns around, most of the gains happen in the first two weeks of the upsurge. To move to cash at a point like this not only unnecessarily locks in losses, it puts an investor out of position for an eventual turn around.

This commentary is short on purpose because the very best thing you can do at a time like this is to continue holding your positions. For those of you with 401(k)s, this is a tremendous opportunity to continue adding to the market every paycheck while prices are low.

Changing direction, here’s a question for you: Why did I mention Vitamin C in the title?

Answer:  Because the human body can’t store Vitamin C. This means we must constantly refresh our supply – just as we must consistently remind ourselves that the best thing to do at times like this is:

Stay the Course!

As always, we are here to support you – in good times and bad. Please feel free to lean on us for the reassurance you may need during these difficult times.

All my best,

Al Wooster

Past performance is not indicative of future performance. Loss of principal and/or loss of portfolio value are possible.