What To Say?

Carolyn & Brett

As Brett and I approached writing the quarterly market commentary last week, we had worries about mundane topics such as interest rates. It is heartbreaking how the world can turn on a dime. The heinous acts of violence this past week were gut-wrenching and who knows where this will lead. Market commentary is trivial in comparison.

In 2006, Elie Wiesel quoted Albert Camus, “Where there is no hope, one must invent hope.” He went on to say, “It is only pessimistic if you stop with the first half of the sentence and just say, ‘There is no hope.’ Like Camus, even when it seems hopeless, I invent reasons to hope.”

Continuing to hope is important right now; and of course, we must implore our leaders to do better. As Elie Wiesel also said, “Action is the only remedy to indifference: the most insidious danger of all.”

As history plays out, we have to keep living and going through our day-to-day routines. And we have to keep hoping and standing up where we can. Part of that routine for us is doing our job so our clients can at least have financial peace while we all process this madness.

Given that we truly don’t know what to say about the state of the world, we can still provide our thoughts about the markets, share what happened last quarter, and how we are approaching your investments in the present.

So for the quarter - the US stock market (S&P 500 index) recorded its first negative quarter this year losing 3.3% in the 3^rd quarter. The US Aggregate Bond index also declined 3.1% this quarter causing the index to turn negative for the year. With stocks and bonds both having a bad quarter, you may be asking what the heck happened?

A pullback in the stock market may have been inevitable. The US stock market (S&P 500 index) gained over 8% in each of the first two quarters of 2023. As much as we would hope for each one of you to have 8% returns every quarter, that rate of return proved to be unsustainable. Even with the 3^rd quarter decline, the US stock market (S&P 500 index) is still up 13% year to date.

Along with the recent travesties, another major headline that continues to haunt the markets is whether or not the Federal Reserve will continue to hike interest rates or pause at current levels. There’s been much speculation and market volatility surrounding higher interest rates and if this will cause a recession. While interest rates have caused volatility in the stock and bond market, there have been some positives for bond investors. 

With the changes in interest rates, we are managing the bond side of your portfolios differently. Money market accounts with Fidelity have benefited paying almost 5%. Remember, these rates may not be around forever! The 22-year high in interest rates have allowed us to purchase longer term bonds to lock in higher rates for a longer period of time. This provides protection as interest rates drop quickly. Let’s not forget interest rates were near zero just 3 years ago!

Our investment approach allows us to revisit your investment allocation at least every quarter. When the market goes on sale, we do not panic but rather take advantage of the discounted prices. Think of it this way- if your favorite store has a sale, you buy all of your favorite items at the lower price. If the stock or bond market dips, we simply treat it like a sale at our favorite store.

Market declines are inevitable but regular portfolio rebalances can help us stay on track to achieve your long-term goals. The world will continue to throw curveballs at us; however, resiliency and discipline are what will lead us to a brighter future. This is why staying in an investment allocation based on your personal ability to take risk is the most important monetary choice you can make.

Take care of yourself and live your life fully. We are here for your comments, questions, and just to talk. Thank you for being with us in this crazy world.

“If there is righteousness in the heart, there will be beauty in the character. If there is beauty in the character, there will be harmony in the home. If there is harmony in the home, there will be order in the nations. When there is order in the nations, there will peace in the world.” - Confucius