Investing your life savings over time will be an emotional journey. Investors will find themselves exuberant by rapid growth in value at the start of a new bull market. And then become exasperated when bear market conditions erode gains and value in quick fashion. During years of managing investment portfolios, it most often feels like a slow random walk; sometimes like a walk in the desert that is boring. Since the onset of current bear market conditions 15 months ago, it is understandable for investors to get caught up in stress, anxiety and even unhelpful thoughts and emotions. Rainy days are never fun compared to sunny times. Comedian and actor Reggie Watts(1) shared this phrase, and Melli O’Brien(2), a mental strength coach, promotes the idea by sharing about a favorite practice called “when in doubt, zoom out.” When we become fixated on our anxieties and struggles, our problems and worries, or our insecurities, they can become very intense and overwhelming; even giant-like. Everything else gets overshadowed and hidden. The practice to “zoom out” from whatever negativity is creating issue, helps one see a wider perspective and thereby find some “breathing room” or much-needed mental space. Let’s develop this thought relative to our current bear market concerns or worries. Let’s “zoom out” on two topics influencing current and near-term market action.
“Who’s Driving?” – April 2023 Nvest Nsights Q1 Newsletter
We are encouraged by the beginning of Spring weather, and hope this note finds you the same. For investors, both stocks and bonds finished the 1Q with gains, but it was anything but easy. Stocks vaulted higher in January on renewed hope from investors that the Fed just might stick the proverbial ‘soft landing’ for the economy and be able to end its rate hiking campaign. But in February economic data remained just too-hot and was again viewed as “bad”, counter to the idea the Fed could stop or even slow its tightening, sending the markets quickly back down. As the bond market quickly priced-in additional rate hikes to come from the Fed, two “weak-link” banks broke in early March and ushered in several weeks of fear about the viability of the global banking system. Quick steps taken by policy makers seemed to calm those worries and permitted stocks to claw back into the black by month-end.
But where do we go from here, and what should investors make of recent market performance and confusing sector leadership? This quarter we offer the following brief articles:
Are My Assets Safe?
Nvest, since its inception, has utilized the brokerage and custody services of Charles Schwab & Co. We consider Schwab to be the industry leader based on its history, low fees, and industry leading technology; it is also long considered one of the most conservatively managed asset custodians in the industry. While the entire industry continues to undergo significant changes via consolidation and expanding access to investing via cost reductions (advocating for no-load mutual funds, elimination of trading commissions, account maintenance fees, and more), Schwab’s commitment to client security and financial stability remains unchanged. For example, Schwab avoids underwriting new securities issuance, does not hold or permit direct investing in risky or highly speculative assets (such as cryptocurrency), and remains highly protective of client assets.
Special Market Update – Weak Chain-Links Break
Bank regulators were caught off guard last week as three banks failed. First Silvergate Capital, then Silicon Valley Bank (SVB) on Friday, and Signature Bank over the weekend. Bank failures are rare. Yet, it should not be a surprise when a weak link in the chain breaks as monetary conditions tighten via higher interest rates and minimal money supply growth. History shows that leveraged situations become strained when financing costs rise and economic conditions slow. That is our present situation – slowing economic growth due to fast rising interest rates to fight high inflation.
“Buying USA” – March 2023 Commentary
Buying USA
This commentary offers three ideas with a common theme centered on valuation. We monitor various economic, market and political research to understand the current financial market backdrop. We hope these topical writings share our thinking about investing in today’s environment.
“Mr. Kadiddledopper, He’s Confusing” – Feb 2023 Commentary
Do you know, or ever meet, a Mr. Kadiddledopper? If so, you’d surely remember. He is a man of opposites. Kadiddledopper is a guy who lives in a small town, whose house looks badly in need of painting; yard needs mowing; landscaping is overgrown with tall weeds woven in; and a broken picket fence with peeling paint. Even his clothing announces a reclusive personality. The town folk don’t know how to relate to him. Mr. Kadiddledopper speaks in opposites. Understanding his talk is challenging and confusing. “Bye. Sure is cold today,” he says when greeting you on a humid 90 degree day. Caution when following his directions – turn left when he says go right; stop means go, and go means stop; up-town means down-town. When he answers “no,” he really means yes, but a most peculiar exception is “Yes” always means yes. Is there such a real-life person? Not sure; I created my fictious guy for humorous “fun” with young grandkids. Ever struggle with a toddler who says “no” to everything? Try instructing them that “no” means “yes,” and “yes means “yes.” You may still be frustrated and certain that opposites don’t work. “Don’t try it” with your spouse, and definitely not in public! You will discover it’s easy at first and gets harder with practice. [Italics will denote opposites to avoid confusion.]
“Dog Gone ’22!” – Jan 2023 Nvest Nsights Q4 Newsletter
We hope you enjoyed a nice holiday season and are entering 2023 in good health and spirits, optimistic for what the year ahead might bring. For many investors that may feel difficult given the stormy market environment; yet we should each resolve not to give way to unreasonable pessimism either. This quarter we offer several items in our newsletter:
- “Dog Gone ’22!” – some of the most friendly words we could come up with to convey the frustration that most probably feel for the investing experience over the last year, but more importantly a quick review of the factors that influenced both the stock and bond market.
- “Snoozer Cruiser – Dreams for ’23” and “Portfolio Tactics” – We share the key items we are watching; what they might mean for investors in the year ahead; and how we are strategically positioning portfolios.
- “The Upside to Rate Hikes & Secure Act 2.0” – The Fed’s aggressive rate increases last year are not all bad… we share some ideas for how(where) you can get paid significantly more on your cash. Also, some quick highlights about the just passed Secure Act and how it may impact you.
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We hope these updates are helpful and encourage you to review. Please do not hesitate to call or email with questions, or to coordinate a time to visit together.
“The Upside to Rate Hikes” and SECURE Act 2.0
As shared throughout 2022, the Fed’s battle with inflation is the dominant force driving challenges in both the stock and bond markets. In addition to a challenging market, borrowers are feeling pain in the form of higher rates on mortgages, credit cards, auto loans, etc. These are the painful realities of reversing the Fed’s previous interest rate (ie. free money) and quantitative easing (QE) policies.
There is an attractive positive to higher interest rates however. For savers, cash is finally returning a “reasonable” rate… if you know where to look! Continue reading
“Horsefeathers! #$*^” – December Market Commentary
Ever hear someone say “horsefeathers”? It’s peculiar, so when it’s exclaimed a puzzled look often occurs. “Horsefeathers” is politely spoken when something did not go right – like I made a bad pickleball shot or missed an easy putt; or a goofy mistake occurred that could be anticipated. It’s amusing that I used this word for years and decades. As I considered using “horsefeathers” for the title of this commentary, I’m taken back by its age and origin – originating from the 1900s. It was used in several film gags from the Marx Brothers’ (Groucho, Zeppo, Harpo, and Chico) in “Fun in Hi Skule” (1932). “Horsefeathers” is slang for nonsense, foolishness, rubbish; indicates disbelief; like “Oh, that’s just horsefeathers, and you know it.” Sometime in the future maybe I’ll share about Mr. Kadiddledopper, or the idea of “enjoying your snooze cruiser.” [NOT, you may develop thoughts that I’m crazy.]
“Three-in-One” – November Market Commentary
Three-In-One: This commentary shares three shorter writings about the changing investment landscape. We hope presenting these ideas is helpful; we share our “radar screen” as we navigate these perplexing times. – Bill Henderly, CFA, Nvest Wealth Strategies, Inc.
Price & Time
October financial market performance is often thought to be scary. That’s because some of the worst historical drawdowns occurred in October – 1929 and 1987. Interestingly a number of past bear markets also “died” in October of which several were also midterm election years. 
Did you know, that September is more often a negative experience? October 2022 represents the single best performance month this year for stocks and client portfolios. It provides at least momentary respite from an otherwise trying YTD. The financial market system may be “voting” on several changing tidbits – inflation may be peak which some think should lead to a Federal Reserve pivot or pause (but that seems unlikely before 2023); company earnings are softer but better than expected; and upcoming mid-term elections may produce Washington gridlock, a condition markets generally prefer. The S&P500 advanced +8.1% during the month which generated positive client portfolio returns as well. YTD returns are still decidedly negative but improved from their quarter-end market lows.