October 2022 Market Update

October 2022 MARKET OUTLOOK

Do you know what all highly successful athletes and financial strategists do?

Have you ever read stories about professional athletes?

I recently watched a video series about one. These stories fascinate me, even though they all have three things in common. They all practice, watch historical tapes and have multiple coaches in specific areas of their craft. (a throwing coach, a strength coach, an endurance coach, a physical therapist, a dietician, and the list goes on).

We do the same, and I suggest you do the same in your chosen profession.

Last month we discussed the likelihood that rates would continue to rise and things to be cautious about.  We talked about the hidden dangers of holding too much cash, being wary of chasing higher rates, the risks of abandoning your strategy completely in fear, and specifically, a concern for investments in overseas companies or those highly exposed to foreign currency. Looking back, I would not change that sentiment.

This month let’s focus on simply:

What We Expect & Why?  

Soon I believe we will get the news that we have been in the most widely anticipated recession in modern history, and this one is worldwide. The burning next question is will we dip into depression territory?

Hang with me here. I have better news coming, but it is important that we deliver both the good news and the bad news in an effort to ensure we are properly positioned for all scenarios as best we can. We are always moving (NOT TIMING THE MARKET) to position ourselves to profit as best as possible. We can get angry, despair, freeze in fear, take fearful knee-jerk reactions that permanently damage our long-term plans, or analyze, think things through, and adapt. It is all an individual choice.

I have watched the game day tapes from history, listened to my coaches, and practiced for over three decades. The following is how I see it when I combine the history of the game tapes with personal experience and my coach’s expertise.

The history (game day tapes) and current events tell me that we are in a global bear market in bonds for the first time in 70 years or since 1952. Some, like the Wall Street Journal, say this is the worst long-term bond market since 1842, while others argue that it is 1886.

None of that matters.

Let’s agree that bonds have not been a good hedge against stock market risk, and neither have other traditional hedges such as gold. We also hear from the Wall Street Journal that more than $32 trillion worldwide stock market value has been eliminated since last November.

I do not believe inflation can be controlled due to the energy and food crisis that is not going away soon. The data shows consumers have pulled back spending on nonessential items, and history tells us what consumers tend to cut back on first. We also understand what consumers still need and will have to purchase, no matter how high the price.

It has been said that Mark Twain (Samuel Clemmons) once said that the rumors of his death had been greatly exaggerated.

(note that is not exactly what he said in a letter to the editor after his obituary was published a bit early.)

We see this idea playing out year after year as the demise of the U.S. dollar continues to be reported. Once again, it is so strong worldwide now that it is causing problems not just overseas but for exporters here in the states as the price of their goods overseas rises ever higher, reducing demand for their products.

The continuing strength and use of the dollar as a worldwide reserve currency make me skeptical of the overwhelming scope of what is known as “Bidden bucks,” about which some speculate. The impact of this concept on a wide scale would seem to cause massive worldwide economic issues.  Further, the idea that the U.S. would open itself up to the possibility of giving up the coveted reserve currency status the dollar now holds seems implausible.

That said, as always, I could be wrong, which is why we continue to watch this situation with interest and position ourselves so as not to be caught off guard.

Final Three Thoughts:

– Bankers worldwide are raising rates to reduce the money supply, which is meant to put the brakes on their various economies. Politicians are pushing money into the system, thereby essentially stepping on the gas, which is a recipe for going nowhere. Eventually, one side or another loses and leaves a lot of damage to be fixed.

– We saw just last week how one unexpected and potentially positive news story moved markets very quickly higher before more negative news came out and took us right back down again. A reminder that timing the market is a fool’s errand. One unexpected event or news story and those who tried to time the market will have locked in losses.

– Many bargain-priced investments are available if you have the time horizon and intestinal fortitude to weather this market. Remember that each investor and their needs are different. Keeping your cash flow regulated where you need it to be now and down the road is the most crucial part of financial strategy.

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Nothing in this communication should be construed as personal advice, and past performance is no guarantee of future results. Investing is not appropriate for everyone. There is a risk of loss associated with investing in the markets. No representation or implication is being made that using any methodology or system will generate profits or ensure freedom from losses. Guardian Rock™ LLC and its affiliates are fiduciary investment advisors. Please consult Guardian Rock™ or another experienced investment advisor before making investment decisions and trying to implement the strategies and tactics we discuss in any of our publications.

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