As we look back, being fairly conservative served us well (keeping it in context). The game of “losing less” is where we are and all things considered, we’re ok. Over 25 years it never feels good. Quite the opposite. But the reality is exactly that… boom and bust cycles are a thing and the downside volatility is the price of admission. The giant reset button has been pushed and the new age investors in things we didn’t understand (crypto, NFTs, SPACs, etc.) are gone. Like Wile E. Coyote, blown up with their own gadgets. Feels like 2002 again where all the day traders went back to their day jobs.
Bear markets are where people question everything. Our beliefs, our fortitude, and our risk tolerance all in question. The media will focus on “how much worse it will get.” Suddenly, the aggressive folks aren’t so aggressive. People that couldn’t buy Apple fast enough at $183 aren’t interested at $137. Microsoft at $350 a year ago is now at $232 and it’s nothing but crickets. Boeing at $121 down from $237 a year ago and nobody has the slightest bit of interest. Classic bear market behavior and that’s a good thing. It’s a test of will and character. One that has been repeated since 2000, 2002, 2008, and 2020. The problem with the markets now isn’t massive selling, it’s loss of interest on the buy side. Creates volatility like we saw this week with exaggerated moves and quick U-turns.
As we sit today, a lot of bad news is priced into the markets. Just like 2020, we don’t need good news to reverse course, just less bad news. Less bad is the new good. A recession is priced in and not a mild one. I happen to agree that recession is not only imminent but needed. As the Fed hikes rates higher and inflation gets choked out, slowing economics will happen. Personally, I wouldn’t be making large commitments on real estate right now, but that’s just one man’s opinion.
Looking into Q4, expect portfolio rebalances and some nibbling on the equity buy side. We have held off with the heightened volatility, but at these levels the values are getting very compelling and too hard to pass up. On the bond side, we are staying conservative on both duration and quality. We do believe from the ashes comes the phoenix and this time will be no different. Might take a bit longer than people want, but the bear will leave and usually when no one expects him to.
As always, don’t hesitate to reach out for anything at any time. We work for you and it’s a commitment we don’t take lightly. Stay well and talk soon…
Ed, Frank, Tammy
Edward Stiles
200 N Union St.
Kennett Square, PA 19348
Office 610-719-0615 Cell 610-745-1931
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