Cassidy Financial Services, LLC. Update For You!

CFS Viewpoint – October 14, 2022 – Here we go again! 

For the third time since 2018, we have a sharp decline in the markets.  This time however, not only did the decline take place in stocks but we also saw a correction in the bond markets.  Each time this has taken place there were distinct issues that caused the decline and those issues felt like they would never cease, but they did.

So what’s going on now to cause this turmoil? Inflation, interest rates and consumer sentiment are the primary drivers currently impacting the markets. As we progress we will need these three key areas to improve to effect where the markets head next. Let’s consider each of these areas:

Inflation has been rearing its ugly head for some time. Believe it or not, modest inflation is actually healthy for the economy and the markets!!

However, we had a confluence of events to cause a sharp increase in inflation.

First, due to the shutdown of the economy the ability to build and move product was not possible. Therefore we had a limited amount of products to purchase which inherently drove up the prices.

At the same time the government printed quite a bit of money to assist those in need. Again, with the economy essentially closed – there was nowhere to spend much of the money that was provided. That is, until the economy reopened. Once the economy opened, we had a shortage of supplies and excess cash on hand to spend – and this drove prices up – very quickly. In our opinion, we are looking at the correct side of the inflation spike. The cost of oil, gasoline and most commodities have come down significantly from where they were – and we would expect this trend to moderate.

We had very low interest rates for more than a decade which assisted in keeping down borrowing costs for both individuals and businesses. That said, we could have used a slight increase over time from the zero interest rate levels we were in.

The Federal Reserve has taken notice and unfortunately has increased interest rates at an incredibly fast rate. This has the markets on edge. The issue isn’t the increase in interest rates per se, it’s the speed with which they have been increased. It would appear that we are nearing the end of these increases – and it still remains to be seen how the economy will react to the recent hikes.

At the moment, the markets are not in favor of these rates – but will they be a year from now once we have more data to analyze the impact of the current rates. One positive is we have seen noticeable increases in CD rates, fixed annuities and short term bonds which we will be utilizing where appropriate.

There isn’t much that feels very good at the moment economically. The same could have been said in the 4th quarter of 2018 and we had rebounded by early in 2019. We also experienced this same feeling in the first quarter of 2020, during the COVID outbreak, only to have rebounded by July of the same year. We closed the end of 2021 at all time highs in the markets after these two corrections.

Of course, the markets do not go straight up and we would have expected a mild correction before proceeding forward. Unfortunately we have experienced a steep decline in the first 3 quarters of 2022 which of course has investors on edge, and we have consumer sentiment at exceptionally low levels. We recognize and understand the frustration of years like this. However, when we see such low public sentiment, this is typically a sign that the markets are scraping along the bottom of their ranges and typically bounce up in the coming 12 months. We will need just a few signs of good news before we head back in the right direction, and unfortunately the public sentiment doesn’t improve until AFTER the markets have begun their recovery.

Which reinforces the fact that the stock market is forward looking and will bounce back before everyone feels better. Historically markets bounce back much faster than people tend to expect. As we often say this process resembles some variation of three steps forward and one step back again and again. Over time we grow with occasional temporary setbacks.

So, what do we do? We have to change, right? We must do something, right?

The answer is “it depends on your particular circumstances”. We know what we own on your behalf and why we own it. We have money managers continually positioning assets in a manner that will allow us to recover with these markets. We also control the allocation that you have and can manage that as we proceed through these choppy markets. So unless something has changed in your investment profile, please know that we are doing everything we believe to be right on your behalf in these turbulent times.

We look forward to meeting or speaking with you at anytime regarding your personal investment plan. But please know, we see what is going on in the markets. We understand the frustration and concern that goes along with these times. It’s vital that we stay in touch to review your personal time horizons and we would be happy to update you on your portfolio and why we are positioned the way we are at your convenience.

We wish you all the best as we head in to the end of 2022 and look forward to a bright 2023!!!

Warmest Regards,

Brian, Arnie and Dan

As usual this commentary is based solely the opinions of Brian Cassidy, Arnie Magid and Daniel Kelly. Nothing in the above written material is endorsed by, or written by, or provided by Cambridge Investment Research, Inc., or by any other outside party or firm.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc.,

a Broker/Dealer, Member FINRA/SIPC.

Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.

Cassidy Financial Services, LLC. and Cambridge are not affiliated.