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January 2023 Performance Review

Stocks and bonds rebounded sharply in January as investors upped bets on a so-called soft landing in the economy. Expectations of falling inflation without a serious recession led to a flurry of dip buying, notably in the hardest-hit areas of last year. Falling longer-term interest rates pushed up bond prices but imply low inflation and probably a recession are in the cards. Economic numbers are by and large very good, considering how fast interest rates have risen, but then it takes time for rate increases to help start a recession, historically.

December 2022 Performance Review

2022 was one of the worst calendar years for the stock market. The 18.15% drop in the S&P 500 (including dividends and index fund fees) was the seventh worst annual hit since the 1920s. This in itself is not that remarkable. The interesting part was that the bond market was also down 13.25% – essentially the worst year in history for the bond market.

November 2022 Performance Review

November was a great month for pretty much anything that was down over 20% over the last year or so. This current stock market rebound started in late September and has boosted the S&P by over 10% from the lows of the year, and by even more for harder hit markets.

October 2022 Performance Review

The US stock market rebounded strongly in October, rising over 8%. It was an even better month for value-oriented stocks and energy stocks, which helped push the Dow up 14%, its best month since the 1970s.

September 2022 Performance Review

The hits to the bond market just keep on coming. Interest rates spiked up as inflation signs were alive and well, and the Fed hiked short-term rates by another 0.75%.

August 2022 Performance Review

The rebound in stocks that started in mid-June ended in mid-August, and we’re almost back to square one – a bear market.

July 2022 Performance Review

One problem with the “inflation is coming down soon theory so the Fed won’t have to go nuclear with rates” rosy scenario is that this indicates a weak economy. If prices stop going up with all the work at home and Covid productivity issues globally, then the consumer is tapped out and has cut demand to meet lower supply. How is that economy going to raise earnings to higher levels than the previous stock boom?

June 2022 Trade Alert

We made some changes to our portfolios. The end result was a slight increase in stock and interest rate exposure by moving from shorter-term bonds to longer-term bonds, which are more sensitive to interest rate changes. This means that a 1% increase in rates equates to a bigger drop in price. We also made some changes to our hedging to protect the portfolios from an increasingly likely drop in higher credit risk debt, aka junk bonds. There just isn't the kind of selling from funds going on to mark a great buying opportunity even with the bear market decline.

May 2022 Performance Review

May was a good month for our portfolios, especially relative to US markets.

April 2022 Performance Review

Global markets are not in the mood to fight inflation, and the market reaction to the Fed press conference on May 4 only highlights the growing fear of the world of waning global monetary stimulus.