The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations
for any indicual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.
Economic forecasts set forth may not develop as predicted.
Investing in stock includes numerous specific risks including: the flection of dividend, loss of principal and potential illiquidity of the investment in a falling market.
Investing in special market and sectors carries additional risks such as economic, political, or regulatory developments that may affect many or all issuers in that sector.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S.-based common stocks listed on the NASDAQ stock market. The index is market-value weighted. This means that each company’s security affects the index in proportion to its market value. The market value, the last sale price multiplied by the total shares outstanding, is calculated throughout the trading day and is related to the total value of the Index. It is not possible to invest directly in an index.
The Dow Jones Industrial Average Index is comprised of the U.S-listed stocks of companies that produce other (non-transportations and non–utility) goods and services. The Dow Jones Industrial Averages are maintained by editors of the Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the market sectors covered by the average. the Dow Jones averages are unique in that they are price weighted; therefore their component weightings are affected only by changes in the stocks’ prices.
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
This research material has been prepared by LPL Financial LLC.Securities offered through LPL Financial LLC. Member FINRA/SIPC.

November 2022 Client Letter

November 2, 2022

Dear Valued Investor,

October is now behind us and it has delivered on its track record as a historically favorable month for stocks, offering some respite for investors as major equity indices rose for the month. The downside pressure on equities had gotten a bit overdone after investor pessimism during September reached lows not witnessed in quite a few years. From a contrarian perspective, extreme pessimism can often be followed by a market bounce. Such a reaction can serve as a reminder not to react too quickly to near-term market developments. Gains in October helped deliver that message again, though they have only slightly offset this year’s losses during what has been a very tough environment for capital markets.

While it may be easy to consider the October market reaction temporary, there are some potentially sustainable developments that may continue to provide a slight tailwind. First, investors may have begun to look beyond current inflation pressures and the Federal Reserve (Fed) monetary policy tightening cycle toward potentially better conditions in 2023. The market is always forward-looking, and asset prices tend to reflect what may happen months or quarters ahead. If investors continue to look ahead to better inflation readings (inflation has been coming down after peaking in June) and an eventual end to the Fed’s rate hikes, asset prices may begin to more regularly reflect some budding optimism.

The Fed may have been slow to attack inflation, but its policies are working. Jobs and housing markets have been cooling, two inflation variables the Fed is seeking to influence. Some recent softening in economic data, coupled with signals from the bond market, may be indicating that Fed policymakers’ concerted inflation fight may be closer to the end than the beginning. We will be paying close attention to potential subtle directional shifts in Fed policy expectations, which may be instrumental in shaping future market direction.

We are very aware that drawing elements of optimism from a stubbornly poor equity and bond market trend is no easy task. However, times like September when pessimism is at an extreme and emotions are running high, is often when investors need to steadfastly adhere to a clear-eyed view of market history and a good plan.

As we look ahead, the months of November and December have historically been constructive for asset prices. This year’s calendar is complicated by political implications of the midterm elections, but markets historically have responded positively to the opportunity for course correction that mid-term elections provide.  We should also have slowing corporate earnings growth and greater economic uncertainty to contend with, some formidable seas to navigate. Still, as we survey what are better equity valuations, long-awaited income opportunities in the bond market, and a likely less-antagonistic Fed in 2023, there may be emerging reasons to believe that the next year may be more constructive than the last.

Please contact me if you have any questions.

Sincerely,

Wayne Rigney

_________________________________________________________________________________________________________________________

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of November 1, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.

Tracking # 1-05343849

October 2022 Client Letter

October 5, 2022

Dear Valued Investor,

First, we want to acknowledge the tremendous damage and displacement caused by Hurricane Ian. Our thoughts are with those impacted by this devastating storm.

This has clearly been a challenging year for households. Stocks and bonds are both down significantly. Elevated food and gas prices continue to stretch budgets, and higher interest rates have increased borrowing costs. But we continue to see signs that the worst may be behind us. Gas prices are falling. Inflation pressures stemming from supply chain disruptions are easing. And the Federal Reserve (Fed) has taken these price increases seriously and is doing its job by raising short-term interest rates. While the Fed may still gradually increase rates throughout this year, it has already done a lot even as asset prices have come under increasing pressure.

As the third quarter comes to an end, it’s admittedly difficult to be optimistic about stock and bond markets right now. The most recent quarter saw both stocks and bond prices fall in tandem again. The negative returns for both markets were the third consecutive quarterly declines for stocks and bonds. Of the 187 quarters since 1976, there has never been a period that has seen negative quarterly returns for both stocks and bonds three quarters in a row. Said another way, this is the longest period since 1976 that bonds haven’t played the traditional role in portfolios by offsetting losses in the stock market.

So why own bonds at all? The value proposition for core bonds is that they tend to provide liquidity, diversification, and positive total returns to portfolios. Unfortunately, none of those values is 100% certain all the time. Like all markets, fixed income investing involves risks and, at times, negative returns. However, despite the historically poor start to the year, we think the value proposition for core bonds has actually improved recently. Investing is a forward-looking exercise and with the move higher in yields that has already taken place this year, we believe now could be as good as it’s been in quite some time for core bonds. Starting yields on most fixed income asset classes are hovering around the highest yields we’ve seen in over a decade. So we don’t think now is the time to abandon your existing allocation to bonds and in fact, it could be worth a look for those investors underinvested in bonds.

We acknowledge how difficult it is to stay invested during these bouts of market volatility. But markets have already priced in a lot of bad news, and we think we are closer to the end of this negative cycle than the beginning. Potential catalysts for a rebound in the near-term include third quarter earnings season, midterm elections, tailwinds from a seasonally strong fourth quarter historically, and the Fed possibly signaling a pause in rate hikes by year-end. While there may be continued volatility in the near-term, we believe the surest path forward remains to stay true to your existing financial plan.

Please contact me if you have any questions.

Sincerely,

Wayne Rigney

_________________________________________________________________________________________________________________________

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of October 4, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.

 

Tracking # 1-05334431

 

Additional September 2022 Client Letter

September 28, 2022

Dear Valued Investor,

In the last several weeks, we have continued to face elevated uncertainty in financial markets due to high inflation and rising interest rates, and we thought it was an important time to take stock with the final quarter of 2022 just ahead.

It has been a difficult year, not only for investors but also for households and businesses as we all navigate higher prices and borrowing costs. There will be some challenges ahead for the economy as the Federal Reserve (Fed) continues to raise rates to control inflation. We believe the Fed is doing the right thing for the long-term health of the economy, but it does increase near-term economic risks.

Given these risks, we are receiving many questions about stagflation and concerns that we may again be facing the investment environment of the 1970s. But this is not your 1970s- style stagflation. While growth has stalled and inflation has been high, the unemployment rate has remained very low.  The average unemployment rate during the stagflationary years in the 1970s and early 1980s was 6.7%, compared with just 3.7% in August of this year. Unemployment will move higher, but it’s likely to remain low by comparison, giving the economy more resilience than in the 1970s.

At the same time, inflation is decelerating. Gas prices and agricultural commodity prices, for example, have declined throughout this summer. Moreover, rents in some areas of the country are dropping, durable goods prices are declining, and many import prices are falling. When our central bankers are sufficiently convinced, the Fed can slow the pace of tightening as inflation moves closer to their long-run target. Some of the recent market volatility came from mixed inflation signals, so as the signals become more aligned, we expect volatility will fall and investor sentiment will improve.

That level of bearishness right now is very high, but it’s important to remember that historically extreme negative sentiment has often been followed by strong market performance. To take just one example, the American Association of Individual Investors (AAII) has been doing a weekly survey since the 1987. Last week’s survey had a level of bearishness seen only four other times before. S&P 500 returns a year later in those cases averaged over 30%. We don’t know whether that will happen again, but there’s still an important takeaway. As we experienced in 2020, when a lot of negative sentiment is being priced into markets, it may set the bar low for stocks to outperform expectations.

We also have some positive seasonal patterns ahead. November through April are historically strong months for equities. Stocks have also done well after mid-term elections. And the third year of the four-year presidential cycle (which we enter in 2023) has historically been the strongest for stocks.

The recent declines are concerning, and we can’t be certain when the volatility will end. But we do know that conditions continue to indicate that better times are ahead. Market volatility and negative sentiment can make it harder to make investing decisions, but we believe the surest path forward remains sound financial advice from experienced and dedicated professionals.

Please contact me if you have any questions.

Sincerely,

Thomas Wayne Rigney

_______________________________________________________________________________________

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of September 27, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.

 

Tracking # 1-05331514

 

September 2022 Client Letter

September 7, 2022

Dear Valued Investor,

When it comes to stock market performance, August was “the best of times, and the worst of times.” The strong market rally that peaked in mid-August was viewed by many analysts as a transition from a bear to bull market, based on the surge in breadth that stocks enjoyed and the magnitude of the two-month rally that began in mid-June totaling 17%.

The market rebound and overall bullish sentiment began in earnest when Federal Reserve (Fed) Chairman Jerome Powell suggested at the late July Fed meeting that the trajectory of interest rate hikes could ease later in 2022. Market participants translated his words to mean that the Fed would complete its aggressive rate hiking campaign to curtail inflation sooner than initially projected. Stocks climbed dramatically, and the S&P 500 Index recorded its largest post-meeting rally ever recorded. Some meme stocks even came back to life.

The second quarter earnings season, particularly with regard to guidance, also helped propel the market higher this summer because of the widespread pessimism ahead of results. Companies delivered stronger earnings than initially estimated, with 75% of companies reporting earnings per share (EPS) above estimates despite intense cost pressures and continued supply chain disruptions. Energy companies were the undisputed winners in the second quarter on higher oil and natural gas prices, and shareholders were rewarded with both dividends and variable dividends.

Investors remained hyper-focused on inflation, where pressures have shown signs of easing, and perhaps plateauing, if not completely peaking. Headline readings for the Consumer Price Index (CPI), Producer Price Index (PPI), and Personal Consumption Expenditures Index (PCE) have all moved in the right direction, but clearly it’s not been quickly enough for the Fed as they campaign to restore price stability through interest rate hikes to dampen consumer demand. Still, lower gasoline prices have helped to bolster consumer sentiment and lower consumer’s expectations of longer-term inflation.

As the rally intensified in mid-August, a parade of Fed officials gave interviews during which they made it clear that the Fed’s work to establish price stability was nowhere near complete. This became a major theme as market participants hung on Jerome Powell’s every word on August 26 at the Jackson Hole, Wyoming forum for global central bankers. In a concise and clear 10-minute speech, Powell dispelled any notion of an early pivot towards easier policy. Mentioning “inflation” 46 times and “price stability” more times than seemed possible in such a short speech, he made it abundantly clear that the Fed’s path towards restoring price stability “will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” Not surprisingly, stocks ended with a profound sell-off.

As the market closed out August weaker and begins the historically weak month of September, questions about whether the bear market has truly ended linger. September data releases and the upcoming Fed meeting on September 20-21 could help provide important answers. Chairman Powell has reminded us many times that the Fed will be data dependent in making policy decisions. The market also remains highly data dependent as it moves into September.

Please contact me if you have any questions.

Sincerely,

Wayne Rigney

____________________________________________________________________________________

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of September 7, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.

 

Tracking # 1-05323704

August 2022 Client Letter

August 3, 2022

Dear Valued Investor,

Last week was epic for market-watchers. A Federal Reserve (Fed) rate hike, a much-anticipated gross domestic product (GDP) report, and the busiest week of earnings season got most of the headlines. There was even a surprise out of Washington D.C., with a Schumer-Manchin agreement on a climate-healthcare-tax bill and some inflation data that added to the evidence that inflation has peaked. 

Stocks expressed approval of this news, securing its second straight solidly positive week. The S&P 500 Index enjoyed its best month since November 2020 and its best July in over 80 years. Last week’s gains were encouraging. Let’s look at each piece of news individually.

First, the Fed hinted at slowing the pace of interest rate hikes later this year. Whether markets may have gotten a little ahead of themselves remains to be seen, but in the past six weeks, nearly three-quarters of a percent has come out of the market’s expectation for the peak fed funds rate (the short-term rate controlled by the Fed to affect monetary policy). The inflation battle is far from over, but the market’s reaction was encouraging, and the Fed may be poised to surprise the market with a pause by year-end.

Next, the first read on second quarter GDP revealed the U.S. economy contracted for the second straight quarter. The rule of thumb is two quarters of negative GDP defines a recession, but the official definition by the National Bureau of Economic Research is broader than that. With a strong, even if slowing, job market and resilient consumer spending, we believe not enough sectors of the economy are contracting to qualify as an official recession. If a recession comes—probably a 50-50 proposition for the first half of 2023—it will likely be mild. A mild recession was probably already priced in at the June stock market lows, suggesting June 16 may mark the S&P 500’s ultimate low.

Capping off the busy week, the flurry of earnings reports demonstrated that corporate America has managed stiff headwinds effectively. Given the slowing economy, intense cost pressures, and a strong U.S. dollar clipping foreign-sourced profits, a 6% year-over-year increase in S&P 500 earnings per share during the second quarter is quite impressive. Estimates for the second half of 2022 and 2023 have come down as expected, but with expectations so low, stocks generally rallied on results even as estimate were cut.

Looking ahead, August has historically been a weaker month for stocks. But consider that midterm election year lows, which typically come around this time on the calendar for the S&P 500, have historically been followed by an average gain of over 30% over the subsequent 12 months. Moreover, some of the timeliest indicators of inflation, such as commodity prices and various consumer and business surveys, indicate some cooling ahead, even if it may be a slow process. Market-based interest rates—those not controlled by the Fed—have come down quite a bit, supporting stock valuations. 

At the same time, geopolitical tensions are rising as House Speaker Nancy Pelosi visits Taiwan and the war in Ukraine continues. But we believe the combination of low valuations, lower interest rates, prospects for inflation reducing, and the possibility that the Fed signals a pause over the upcoming months tip the scales toward the bulls. The ride probably won’t be smooth, but we believe long-term investors who stay the course won’t have to wait too long to be rewarded for their patience.

Please contact me if you have any questions.

Sincerely,

T. Wayne Rigney

 

______________________

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of August 2, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. 

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

2022 Midyear Executive Summary

CLICK HERE TO READ THE FULL ARTICLE

OVERVIEW

Markets rarely give us clear skies, and there are always threats to watch for on the horizon, but the right preparation, context, and support can help us navigate anything that may lie ahead. So far, this year hasn’t seen a full-blown crisis like 2008–2009 or 2020, but the ride has been very bumpy. We may not be flying into a storm, but there’s been plenty of turbulence the first part of 2022. How businesses, households, and central banks steer through the rough air will set the tone for markets over the second half of 2022.

The sources of turbulence are clear. A global economy that was already vulnerable to inflation from supply chain disruptions, tight labor markets, excess stimulus, and loose monetary policy came under more pressure when Russian aggression in Ukraine added sharply rising commodity prices and pushed Europe into what may be the brink of a recession. The effects have included renewed pressure on interest rates, which hurt bond investors and contributed to tightening financial conditions, and a much more aggressive stance by the Federal Reserve (Fed) and other global central banks. Add in the typical market challenges of a midterm election year and the third year of a bull market, and it’s not surprising it’s been a bumpy ride. Understandably, rising prices, slowing economic growth, and a challenging first half for both stocks and bonds have many investors on edge, and fatigue from more than two years of COVID-19 measures doesn’t make it any easier. But markets are always forward looking, so it’s important to remain focused on what lies ahead. There will most certainly be challenges, but there are also some tailwinds from a strong job market, still resilient businesses, and the likelihood that inflation will soon start to slow. Markets historically can even get a little lift from lower uncertainty around elections as midterms approach.

Turbulence cannot be avoided, but it also need not deter us from making progress toward our financial goals. LPL Research’s Midyear Outlook 2022: Navigating Turbulence is designed to help you assess conditions over the second half of the year, alert you to the challenges that may still lie ahead, and help you find the smoothest path for making continued progress toward your destination. When times are turbulent, the surest path toward progress remains sound financial advice from dedicated professionals who have logged many hours in similar conditions. Please reach out to me with any questions.

July 2022 Client Letter

July 6, 2022

Dear Valued Investor,

As the calendar has turned to July, investors would certainly like to forget the first six months of 2022. However, the Fourth of July Independence Day holiday does bring with it reason for celebration. Not only is it the 246th birthday of the United States of America, but July has historically been a pretty good month for stocks. Over the past 10 years, the month of July has been particularly good, with the S&P 500 Index averaging a monthly gain of about 2%.

Both stock and bond markets have been challenging this year, but it’s important to focus on what this tends to mean looking forward. Consider that after the eight biggest quarterly stock market declines since WWII, the S&P 500 rose an average of 6.2% in the subsequent quarter with gains in seven of eight quarters. Moreover, after the seven biggest two-quarter declines, stocks rose an average of 21.5% over the subsequent six months, rising every time.

Despite the market volatility, many portions of the U.S. economy remain relatively strong. However, easing growth expectations over the last few months have investors worried—we now expect U.S. real GDP growth to be around 2% in 2022. Front-and-center are the persistently high inflation readings, and while we do expect those to subside, they have lasted longer than our base-case expectations. High consumer cash balances and a relatively strong job market (3.6% U.S. unemployment rate) offset some of the growth slowdown caused by inflation. Taken together, we believe the U.S. consumer has some tools to weather the inflation storm, though we are going to need to see some near-term improvement in inflation to maintain our confidence in the consumer.

The apparent rightsizing of the historically negative correlation between stocks and bonds has been a welcomed development. For several months now both bonds and stocks have been going down in unison, a relatively rare occurrence. That price action sparked talk of the demise of the typical 60/40 stock bond portfolio—a conjecture that we believe is overdone. Nonetheless, the dual weakness in stocks and bonds has been decidedly uncomfortable for many. This relationship has been normalizing in recent weeks, indicating some reappearance of the historical pattern. Notably, the Federal Reserve’s policy response on inflation will be an important barometer here. However, long-term rates do historically tend to peak prior to the Fed ending its interest rate hiking campaigns, which could be good news for bonds in the coming months.

In terms of the stock market, we believe some reprieve from the price pressure could be in the offing. Many indicators are pointing to oversold conditions, although evidence of complete capitulation remains spotty. In our view, any good news on the inflation front could spark a rally. This may come to pass, especially if a recession can be averted in 2022 as we expect. Should the U.S. economy indeed fall into recession, the consensus is indicating a shallow recession may be a likely outcome. Meanwhile, we are indeed on-guard for an improved monthly inflation reading that could help revive the bulls. Maybe America’s birthday can kick-start some optimism. Please contact me if you have any questions.

Sincerely,

Wayne Rigney


Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of July 5, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Tracking # 1-05300922

June 2022 Client Letter

June 1, 2022

Dear Valued Investor,

The bull market that began in March of 2020 came dangerously close to an end. From March 23, 2020 through January 3, 2022, the S&P 500 Index gained 114% (excluding dividends). From that January 3 closing high through the recent low on May 19, the S&P 500 fell nearly 19%, narrowly avoiding the level at which bull markets end and bear markets begin.

While we wait uncomfortably to see if the S&P 500 can hold its recent lows, it is somewhat reassuring to know that bear markets that are not accompanied by recessions tend to be milder:

  • Bear markets without recessions tend to last an average of about seven months, and we’re already five months into it.
  • The only bear markets that took more than 46 days to bottom after the initial 20% decline were associated with recessions—1970, 1973, 1982, 2001, and 2008.
  • Bear markets not accompanied by recessions have historically experienced smaller declines, losing an average of 24%.
  • Five of the past six non-recessionary bear markets saw the S&P 500 lose 22% or less.

Bottom line, if the U.S. economy is able to avoid recession over the next 12 to 18 months—as we expect—then this selloff may be over soon and stocks could potentially make a run at their previous highs by year-end.

That doesn’t take away from the increasingly challenging environment consumers and businesses are facing as sky-high inflation shows few signs of relenting. Recession risk is rising, increasing the chances of a larger decline—the average recessionary bear market decline is 34.8%. The Federal Reserve has taken away the punchbowl, giving markets a hangover. The cure is lower inflation, but it will take time.

Those who believe this environment is like the 1970s, 2000-2002, or 2008-2009, may want to consider more defensive positioning of portfolios. Those are the types of environments where some companies don’t survive. But if the economy stabilizes as the Fed hikes rates to tame inflation—the so-called “soft-ish landing” Fed Chair Powell aspires to achieve—then the best path forward may be to ride this out. Market timing is hard. The sharpest rallies tend to come during bear markets and are costly to miss for long-term investors.

Investors are anxious right now and understandably so. Legendary investor Warren Buffett tells us that situations like that are an opportunity to be greedy, not fearful. Sir John Templeton, another legendary investor, tells us bull markets are born on pessimism (and grow on skepticism, mature on optimism, and die on euphoria). Well, we have a healthy dose of pessimism right now to provide fuel for the next rally.

Buffett’s advice makes sense but is difficult to follow in practice. For those who can fight off the temptation to sell when stocks are down and have an investing time horizon spanning more than a year or two, history suggests you will be positioned to do well. Bear market recoveries prior to record highs take 19 months on average. When not accompanied by recession, they take just seven months. From a long-term investing perspective, that’s not long to wait. Please contact me if you have any questions.

Sincerely,

Wayne Rigney

____________________________________________________________________________________

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of June 1, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Tracking # 1-05286775

Additional May 2022 Client Letter

May 11, 2022

Dear Valued Investor,

2022 has been a challenging year for investors so far. The S&P 500 Index just had one of its worst Aprils in decades, and May is off to a rocky start. Bond investors have not fared much better as rising interest rates have pushed down bond prices. Bond losses have made the stock market volatility feel even worse than usual. Markets don’t like uncertainty but it’s getting a healthy dose of it this year, dealing with high inflation, tighter Federal Reserve monetary policy, COVID-19 shutdowns in China, and snarling global supply chains, all while the war in Ukraine continues.

Investing mistakes often take place during periods of elevated volatility. One of the most frequent is trying to time the market by jumping in and out. Market timers must be right twice, and timing the return to the market can be extremely difficult to pull off. Markets can turn quickly, and missing even just one big up day can significantly reduce returns over time. The biggest daily gains tend to come in down markets, making them especially difficult to predict. Time in the market, not timing the market, may be more beneficial to long term investors.

When markets are shaky, it can be helpful to look to long-term fundamentals that have provided the foundation of positive returns for stocks and bonds over the long run. For stocks, gains depend on the ability of corporations to grow earnings, which they have continued to do during first quarter earnings season—S&P 500 Index earnings per share are on track to increase 10% year over year. For bonds, the key fundamental has simply been the ability of borrowers to make required payments. Corporations and consumers enjoy strong balance sheets and have the financial firepower to pay their debts. While the future is always uncertain, we believe those fundamentals remain in place.

Even against a potentially supportive fundamental backdrop, the volatility we’ve seen in stocks this year is not unusual. Although negative returns for a full calendar year are infrequent, corrections are fairly common. Since 1980, the S&P 500 has been negative for a calendar year just seven times, but the average decline within any year has been 14%. Mid-term election years have tended to see increased early year volatility, as the honeymoon period for a new president ends and political uncertainty rises. Inflation can also be challenging. Years with inflation over 5% have seen more frequent stock market declines than a typical year, but stocks have still been higher more often than not.

Amid the global economic and geopolitical uncertainty, the core domestic economy is still quite stable. Weekly consumer spending data is above typical baseline levels. Job seekers are participating in a tight labor market with twice as many openings as unemployed people. Businesses are enjoying high profit margins despite cost pressures. The economy is expected to grow in the latter part of this year after a surprise contraction in the first quarter, though the growth path may be bumpy as monetary policy is recalibrated from exceedingly loose to moderately tight and consumers and businesses adjust to higher borrowing costs. Our base case is still for above-trend economic growth in 2022.

We believe patient investors stand a better chance of meeting their long-term goals. No one has a crystal ball, but at lower valuations, history suggests the chances of above-average returns going forward may be rising. It’s tough to do during times like this, but we encourage long term investors to stick to their game plan.

Please contact me if you have any questions.

Sincerely,

Wayne Rigney

___________________________________________________________________________

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of May 9, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Tracking # 1-05279947 (Exp. 05/23)

May 2022 Client Letter

May 4, 2022

Dear Valued Investor,

As we move into spring and leave behind the last signs of a long winter, many worries from a chilly start to the year for markets, unfortunately, are still with us. The S&P 500 Index had its worst April in more than 40 years, leaving the index down over 13% for the year. Previously highflying stocks have come back to earth, with many of them cut in half or more. And bonds, which have historically provided support during times of stock market volatility, have done little to protect portfolios.

The concerns that have contributed to the poor start are well-known. Historically high inflation, supply chains disruptions, China in another lockdown, geopolitical concerns, an aggressive Federal Reserve Bank (Fed) rate hiking campaign, and soaring yields have all contributed to the worries. Not to mention economic growth worries are spreading after the 1.4% decline in gross domestic product (GDP) during the first quarter.

Just as April’s dark storm clouds are often chased away by a brighter May, we remain optimistic that more sunshine could be coming. Yes, the GDP report showed an economy that contracted in the first quarter, but that was mainly due to drags on inventory and trade, while more important parts of the economy like consumer spending, housing, and private sector investment all accelerated compared to the fourth quarter. Additionally, 2011 and 2014 both saw negative first quarter GDP prints, followed by big rebounds in the second quarter to avoid recessions. We expect GDP to grow approximately 3% this year and avoid a recession thanks to a strong consumer and a healthy corporate earnings backdrop.

Inflation could be nearing a peak, offering a potential driver for improved confidence in the second half of this year. Used car and truck prices have come down significantly over the past two months, while shipping costs have also dropped nicely. These two bits of data suggest inflation may be past its peak, even if it may take a while for it to get back to normal. Add in supply chain normalization and the potential for a ceasefire in Ukraine to remove some upward pressure on commodities, and the Fed may not hike rates nine times as the bond market is currently pricing in.

From its early January peak, the S&P 500 has corrected 13.9% (as of April 29), right in line with the average yearly correction since 1980 of 14.0%. As uncomfortable as this year has been, this action is actually about average. Additionally, midterm years tend to be even more volatile, correcting more than 17% on average, but the index rebounded 32% on average in the 12 months following those midterm year lows. Lastly, the last 21 times the S&P 500 has been down double-digits since 1980, the index rallied back to end the year positive 12 times. Don’t give up hope yet.

The investing climate is quite challenging, but based on historical trends, we believe patience may be rewarded. Even if there may be some downside in the short term, consumer and business fundamentals remain supportive. Strong profits and lower stock prices mean more attractive valuations, and current levels may end up being an attractive entry point for suitable investors.

Please contact me if you have any questions.

Sincerely,

Wayne Rigney


Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of May 3, 2022.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Tracking # 1-05275942  (Exp. 05/23)