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January 2022 Client Update

Updated: Aug 18, 2022

Good Evening,

I hope that this email finds you, your family, and your loved ones doing well and in good health!

The financial markets are off to a bumpy start this year. Although, the market experienced rather flat volatility last year because of increasing consumer spending, government stimulus spending, and accommodative federal reserve monetary policy enabling a nice recovery from the pandemic. The S&P 500 only experienced a -5% intra-year decline in 2021. The average intra-year decline is since 1980 for the S&P 500 stock index is -14%.

Now I don't have a crystal ball, but I believe we may see this market become more volatile in 2022. Simply for the mere fact that things always change, what goes up must come down and gravity always works. Government stimulus programs are winding down and the much-anticipated Build Back Better Plan has been postponed for now so these factors will no longer provide an economic tailwind. In addition, the Federal Reserve announced that they will taper their bond-buying program and eventually raise interest rates in 2022. Consequently, the financial markets often become more volatile when the Fed talks about raising interest rates and spending less money on financial assets. Inflation is on the rise which is causing higher prices for goods and services and less discretionary income. For these reasons, I believe the financial markets will be more volatile this year although this doesn’t mean that we will have bad results, I think it’s just back to typical intra-year volatility.

Barring any major events, I do not see this to be too concerning currently for these reasons.

  • Since 2009, stocks and interest rates move together until yields on the 10-year treasury bonds rise to 3.6% and then move in opposite directions.

  • Pent-up demand for goods and services, high savings and consumer confidence may result in more spending.

  • Many economic indicators appear to be very positive with a low risk of recession.

  • Economic growth is forecasted to be strong again in 2022.

  • Household and business finances are in great shape.

  • The wealth effect is very positive for consumers with a significant increase in net worth.

  • Low unemployment, strong labor market, and wage increases.

Clearbridge Market Timing
Download PDF • 158KB

As a result, I recommend that we stay the course with your asset allocation and investment strategies unless you have any significant life changes or see one coming then we should revisit your portfolio risk and investments. Plus, as the attached charts suggest, market timing is very difficult to do accurately and consistently and is very costly. The best we can do is get the allocation right, to begin with, and align your investments with a financial plan.

I will be reviewing our portfolios in the coming weeks and may make some mutual fund changes if certain investments are not maintaining the criteria for which we selected them. Next month I will send out our annual brochure of important numbers and a checklist of planning considerations to review for 2022.

Thank you for your business and feel free to call or write with any questions, more information on my data, schedule a meeting, or request service. May you have a happy, healthy, and blessed 2022! Kind Regards, David J. Blount CERTIFIED FINANCIAL PLANNER ™ Investment & Insurance Planning Services, LLC 992 Palmetto St. Oviedo, FL 32765 407-719-0940

Clearbridge Recession Risk Indicators
Download PDF • 153KB

Clearbridge Economic and Market Summary
Download PDF • 145KB

JPM Intrayear Declines
Download PDF • 315KB

CNR Economic Speedometers January 2022
Download PDF • 605KB

JPM Interest Rates and Equities
Download PDF • 272KB

What's Driving Inflation
Download PDF • 112KB

The 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. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Securities offered through LPL Financial, Member FINRA/SIPC

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