This has clearly been a challenging year for households. Stocks and bonds are both down while food and gas prices continue to stretch budgets, and higher interest rates have increased borrowing costs.
But we continue to see signs that inflation pressures stemming from supply chain disruptions are starting to ease. The Federal Reserve (Fed) has taken these pricing pressures 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.
The negative returns for both stock and bond markets saw a third consecutive quarterly decline. Of the 187 quarters since 1976, this is the longest period of time that bonds haven’t played the traditional role in portfolios by offsetting losses in the stock market.
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,
Bryan Foronjy, CFP®
Founder and Principal Wealth Manager
Foronjy Financial
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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.
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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.
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