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Update for Monday, October 24 2022
S&P 500: 3,752.75 +86.97 (+2.37%)
Dow: 31,082.56 +748.97 (+2.47%)
Nasdaq: 10,859.72 +244.87 (+2.31%)
Stocks Soared On Friday And For The Week:
- This rally began with the previous week’s key upside reversal on Thursday, 10/13.
- With so many positives in the economy and the market right now (strong jobs market, increasing GDP, strong earnings season, and Q4 historically being a strong quarter for stocks, especially during midterm years), there’s plenty of reason for stocks to keep going higher.
- In less than a week and a half, the Fed will meet again, with the FOMC announcement on rates coming on Wednesday, November 2. At the moment, there’s a nearly 98% chance that they raise rates by another 75 basis points, which would put the midpoint for the Fed Funds rate at 3.88%. They are then expected to raise again in December by another 50 basis points, which would equal the 4.40% target they set for year’s end.
- We could see stocks playing quite a bit of catch-up after being so oversold and undervalued following three solid quarters of selling.
Investor Fears Create Opportunity
- Now is the time to buy selected stocks with both hands.
- Don’t be distracted by pullbacks and inflation. Overall, the economy is holding strong.
- In fact, Q4 is typically the best quarter of the year for stocks. Even more so during midterm years no matter which party wins.
- And earnings seasons like the current one tend to give stocks a nice boost.
Bottom line – right now, stocks are way underpriced, the markets are way oversold, and you can expand your portfolio at extremely low entry points.
Don’t delay. These market conditions won’t last long.
The Steady Investor
We look at key factors that we believe are currently impacting the market and what could be next for the markets such as:
- How inflation is altering the tax landscape for 2023
- Heating bills could be higher this winter
- Bank of America says that U.S. consumers are in good shape
- China’s economy slowing
- How Inflation is Altering the Tax Landscape for 2023 – Inflation has hit everything from groceries to airline tickets to energy bills, the effects of which are very visible to U.S. consumers. Less visible and understood is the effect inflation is set to have on taxes in 2023. Because of formulas set by Congress, the IRS adjusts key tax code parameters based on inflation, and since inflation is running at 40+ year highs, these adjustments are poised to be significant. For one, the standard deduction is set to rise by 7% in 2023, to $27,700 for married couples and $13,850 for individuals.
- Heating Bills Could Be Higher This Winter – Forecasters at the Energy Information Administration (EIA) stated this week that not only should the U.S. brace for a colder winter this year, but also that Americans should expect to pay more to heat their homes. Almost half of U.S. homes are heated with gas-fueled furnaces and boilers, and prices for natural gas are significantly higher now than they were last year. According to the EIA, Americans should expect it to cost almost $1,000 more to heat a typical home from October to March, which marks a nearly 30% increase from the cost to do so during the 2021-2022 winter season.
- Bank of America CEO Says U.S. Consumer Remains Healthy – There was one notable bright spot in earnings calls this week, which came from Bank of America CEO Brian Moynihan. On the call, Moynihan said the U.S. consumer remains strong and healthy, with stronger-than-expected spending on travel, entertainment, and discretionary items.
- China’s Economy is Slowing, But Few Know by How Much – Economic data coming out of China is notoriously opaque, but analysts and economists faced an even bigger challenge last week in assessing the state of China’s economy. The challenge: there is no data at all.
4 Reasons Why “Self-Managing” Your Retirement Can Hurt You Financially
- Risk 1: “Self-Managing” and Long-Term Planning are Conflicting Interests
- Risk 2: Investor Psychology Inhibits Long-Term Success
- Risk 3: Mistakes Add Up, and Can Take Years to Mend
- Risk 4: Don’t Underestimate the Time and Effort (and Stress) Required to Reach Goals
Bottom Line for Retirement Investors:
The average investor, as detailed by the Dalbar study, has consistently fallen short of delivering the kind of results needed for long-term success.
The performance of an investment portfolio should be managed with a strategy designed to deliver strong results over 10, 20, and 30-year periods—not daily, weekly or quarterly.
Key Strategy Points:
- Retirement Planning
- Portfolio Management
- Personalized Investment Counseling
Don’t Let the Markets Wreak Havoc on Your Retirement. Fight back with smarter investment decisions to beat back market volatility.
Stay the Course?
Warren Buffett famously said, “you only find out who is swimming naked when the tide goes out.” In other words, investors need to consider how much the coronavirus crisis will impact corporations and their future financial stability. Which companies will weather the crisis, and which companies will suffer from debt-driven survival tactics that potentially jeopardize their long-term sustainability?
We believe when successfully managing through this crisis, it will be essential to focus on these 3 investing fundamentals:
- Active, selective investing over passive investing;
- Buying quality above all else;
- Investing in cash-rich corporations with rock-solid balance sheets and steady, predictable revenue streams. These companies are better-suited to weather economic downturns and accelerate out of the recovery while maintaining or achieving market sector leadership.
Bottom Line for Investors:
- We understand how difficult it can be to absorb the daily flood of bad news.
- What’s more, volatility is almost certain to persist in the near term and the situation by the numbers is likely to get worse before it gets better.
- But all of the uncertainty in the world cannot change the fact that bull markets follow bear markets, and that new bull markets almost always begin when the news feels like it can’t get any worse.
- We don’t expect this time around to be any different.
- At this stage, we do not see any sense in trying to ‘time’ the markets. The most important outcome for investors is to ensure you participate in the rebound to the fullest degree possible when it happens