As we approach the end of the first quarter of 2022, I think it is appropriate to briefly review the dynamics at play so far this year and our outlook for the near-to-intermediate term. There is a lot of uncertainty in the markets, and in our world, right now. Inflation and rising oil prices are greatly impacting the U.S. Consumer, while Russia’s invasion of Ukraine has led to a heartbreaking humanitarian crisis. If there is one thing that the market hates, it’s uncertainty. We have seen that play out in a dramatic fashion, in volatile intraday price swings as investors speculate over both when and how much the Federal Reserve will raise rates, and over Putin’s potential endgame by invading Ukraine.
Despite these headlines and volatility, we believe there are actually several positive tailwinds for the market this year. Firstly, individual and business excess savings are the highest they have ever been, and debt service is the lowest it has ever been. Secondly, on top of strong jobs reports, there are around 10 million job openings in the U.S. Finally, Core Capital Expenditure – the number that tracks business spending on physical assets – hit a record high in January. While seeing the market is disconcerting, we believe that these strong underlying tailwinds portend returns in 2022 in-line with long-term historical averages of 8-10%. Corrections are a normal, healthy process in the market cycle. With no correction for almost two years, investors were long overdue for one. We still believe that clients should stay the course, and that natural resources and strong dividend stocks are the best place to weather the next year even despite volatility due to Ukraine and Fed interest rate hikes.
Here in Naples, we hosted our final private client luncheon at the Ritz Carlton Beach Resort. Now, we will pause seminars and client events as we are gearing up for our transition to being a Registered Investment Advisor. There are a few reminders of action items for clients on page 6 of the newsletter. We will be in touch with more information very soon. Please reach out to your advisor if you have any questions or concerns. As always, please contact our office if you have any questions or if we may be of help in any way. It is our privilege to be of service to you and your family.
OUR VIEW INTO MARKET BEHAVIOR AND GEOPOLITICAL EVENTS
THE RECENT TURN OF EVENTS WITH THE INVASION OF UKRAINE
In our last newsletter, we discussed market volatility brought on by inflation and the
uncertainty of higher rates. Then, adding another degree of uncertainty, on February 24, 2022 Russia invaded Ukraine. What has unfolded is a full-fledged humanitarian crisis, with tragic and graphic images of suffering and war. Oil is climbing higher and food prices are increasing as global economies are disrupted. Markets hate uncertainty, and that is being reflected in the continued volatility we are experiencing.
3 MOST IMPORTANT MARKET MOVING LEVERS TO WATCH
At this moment, there are many moving parts that are dominating the news and direction of markets. To boil it down, the three most important market levers to pay attention to are Putin, Prices and Powell, a.k.a “the 3 P’s.”…
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