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Registered Investment Advisor
95 Broadhollow Road, Suite 102
Melville, NY 11747
(631) 923-2485
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Investment Newsletter - Q1 2023 |
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Greetings!
The calendar has turned, and we can officially say goodbye to 2022, which was a bad year for the stock market, and historically terrible year for the bond market.
What will 2023 bring? There are plenty of predictions, and the truth is no one knows. This article in the NY Times (click here) is worth a look at as it makes this point, while emphasizing the "right way" to think about predictions and investing.
After all, who in their right mind would have thought that in March of 2020, just with Covid starting (only stay home to "flatten the curve"), that by the end of that year of no vaccine coming until essentially 2021 and being locked down, that not only were all the losses made up (the S&P was down at it's low 34% in less than three months), that the S&P actually finished UP for the year over 16%!
We give you a deeper insight into our thoughts on the past quarter and 2022 and outlook further below. If you would like, we also have a link to Vanguard's economic and market outlook for 2023 (click here), and the 2023 Global Market Outlook by Russell Investments (click here).
In this issue of our Investment Newsletter:
- Our current investment topic is: 2023 Tax & Retirement Plans Update
- Recent articles where Landmark Wealth Management was quoted in the press.
- An overview of recent market activity, along with Our Perspective...
- A recap of the performance of major market indices from the past quarter
- Upcoming Economic Calendar
You will find past investment articles, by clicking the Articles tab above, or directly on our website, found under Periodicals.
If there is a topic of interest you would like to see covered in the future, please reply back to this email to let us know, or click here. Likewise, if you have any questions on this or anything else, feel free to reply back.
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Investment Topic
Maximizing the Return of Your Savings
For our first investment topic, "Maximizing the Return of Your Savings" we give some of our thoughts and suggestions. To learn more, please click here.
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Recent articles where Landmark Wealth Management was quoted in the press
The past few years, Landmark Wealth Management has been quoted in the press for various articles. We have decided to start sharing these when they happen. If curious about past times we were mentioned, you can see it on our website under Articles > In The Press, or simply click here.
"CPI Aero stock soars ahead of return to NYSE American"
From an article that was in Newsday in October: "CPI Aero stock soars ahead of return to NYSE American". To access this article, please click here.
"Americans are running towards the safety of cash — but here are 3 ways they could screw that all up, pros say"
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"‘I’m close to retirement and feeling uneasy’ as my current financial adviser has ‘made some trades that cost me dearly.’ Is this inevitable in this economy — or do I need to jump ship?"
Two articles that were in MarketWatch in November: to access "Americans are running towards the safety of cash — but here are 3 ways they could screw that all up, pros say", please click here. To access "I’m close to retirement and feeling uneasy’ as my current financial adviser has ‘made some trades that cost me dearly.’ Is this inevitable in this economy — or do I need to jump ship?", please click here.
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Our Perspective on Recent Market News and Activity |
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Our synopsis of the past quarter, a look ahead, and putting it all in perspective: |
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As Mark Twain was reputed to have said, “History doesn’t repeat itself, but it often rhymes”. We are often asked about how does working with the stock market affect us, having to watch it every day and deal with all of volatility that comes its way at times? Our answer often surprises people when we simply state that we don’t worry much about the markets, but more about how our clients will react to the market volatility. We know that markets are cyclical, that some asset classes will outperform, some will underperform, and then it will be followed by a reversion to the mean. This is then followed by an understanding that if you give the market a full market cycle, generally defined as 5-7 years, we will go from recession to recovery to boom and then eventually back to a recession again. It’s as common as moving from season to season. We can’t tell you when the good weather days will be or the bad ones, but winter will not last forever, nor will summer. Our confidence in being a long-term investor therefore not only comes from experience, but also from being students of history and observing how markets have performed over many different Bull and Bear markets cycles. Again no one market is an exact mirror of another, but as Mark Twain said, they often rhyme.
As we reflect on 2022, it was a year that started with somewhat of a promise of getting back to normal. That supply chain disruptions would resolve, that COVID would get in the rear-view mirror, and that this annoying thing called “inflation” would prove to be transitory. We knew that the Fed was late to the game in raising rates, so it was thought that they would raise 0.25% at each meeting of the year, and that we would end the year with somewhere around a 2.25% Fed funds rate. We also watched Russia with a large troop buildup and said, that they are just bluffing, they won’t actually invade. One by one hopes were dashed, COVID still resulted in lockdowns in China, inflation proved to be more than transitory, and we not only saw the first 0.75% Fed rate hike since 1994, but it was followed by 3 more and was sandwiched in between two 0.50% hikes. Russia invaded Ukraine, and suddenly we were dealing with a Bear Market, the worst year for stocks since 2008, the worst year for bonds on record, and debate about whether we were already in or about to go into a recession.
This is where experience comes into play. Recessions occur on average about once every 5 years. So naturally each year brings then a 20% chance of a recession. They are not fun, people do lose jobs and markets react in advance. If you study history, you will see that often, the market starts to recover before the end of a recession. That tells us that while the economic data may get worse, the market, which is a leading indicator, starts to see the coming recovery. We are currently seeing investor sentiment worse than was even seen during the Financial Crisis and the worst since May 1980 (see slide below). Investors usually get the timing wrong, and while many run to cash with newfound higher interest rates, while accepting a real negative return with inflation at 7%, the stock market will recover and remind people that if you want to grow assets long-term and beat inflation, you must remain invested. As you can see in the slide below, in the last 8 troughs of consumer sentiment since 1971, the average subsequent 12-month S&P 500 return was +24.9%.
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History tells us that since World War II, the average Bull Market has lasted 4.4 years on average with a 155.6% cumulative return. The average Bear market has lasted on average 11.3 months with a cumulative decline of about 32%. Math is in favor of the long-term investor. Since World War II the market has experienced 17 negative years. In 14 of the 17, the following year was positive. Now that doesn’t mean 2023 will follow suit, but the odds are in its favor. If you look at the following slide, you will see that over the last 11 recessions, the average decline was -30.6% in the S&P 500 Index, however the average return 1 year later was +43.8%, 3 years later +64.7% and 5 years later +101.3%. |
Over recent years we have fielded many questions about certain individual stocks that have been highfliers, or new types of investments such as cryptocurrency which was eviscerated in 2022. We have let our experience and war stories be our guide in that individual stocks often come with tremendous risk, and that sometimes investment bubbles will form in certain asset classes. It all comes down to the math of investing. If you are down -10%, you need 11% to get back to breakeven. If you are down 50% you need 100% to get back to breakeven. If you are down 70% (Tesla and Amazon were down 65% in 2022) you need 233% to get back to breakeven. That is a long way to get back and it may never happen. Meta (Facebook) was down -64% in 2022, Netflix was down -51%, Apple was down -28%, Microsoft was down -30%, and Google was down 39%. Those are big declines for the largest companies in America. It speaks to why diversification can go a long way to mitigating downturns in the market.
Thanks to the new SECURE Act 2.0, many clients were surprised to recently find out that the required minimum distribution age has been moved from 72 to 73. Please read our article on some of the key changes from that newly signed act (click here for the article). Some clients recently retired and have been hit with a down market, or some people are finding out that due to the market’s decline in 2022, the required minimum distribution has been reduced from what they received in the previous year. Some welcome that as it means lower taxes owed, while others may be concerned about a reduction in their income. Financial planning is filled with a lot of changes that occur within markets, law changes, and life changes. For our clients, it is very important to keep us up to date with what is going on in your personal lives so that we may help. If it has been more than one year since we sat down and updated your planning numbers, please set an appointment with us so that we can answer all questions and make sure that you are stay on a healthy track for financial independence.
Bear markets do not last forever, they just feel at times like they will. Keep the faith and better days are ahead. As Winston Churchill said, “When you are going through hell, keep going”.
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
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Below is the Q4 '22 price return performance of some of the major indices: |
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On the Investment Horizon |
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Upcoming Key Dates on the Economic Calendar
- First Friday of each month: Unemployment report for the prior month, released at 8:30AM.
- Monday, January 17 - Martin Luther King, Jr. Day: US Markets closed.
- Thursday, January 26 at 8:30AM - GDP, 4th quarter and Year 2022 (first estimate).
- Tuesday, January 31 - Wednesday, February 1: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM.
- Monday, February 21 - Presidents Day: US Markets closed.
- Wednesday, February 23 at 8:30AM - GDP, 4th quarter and Year 2022 (second estimate).
- Tuesday, March 21 - Wednesday, March 22: The Federal Open Market Committee (FOMC) meets, and releases their announcement on Wednesday at 2PM.
- Thursday, March 30 at 8:30AM - GDP, 4th quarter and Year 2022 (third estimate).
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For our clients - You should have received your statement directly from your account custodian (TD Ameritrade and/or Charles Schwab). If you have not, please let us know so that we may investigate the matter. Please review your statement carefully and let us know if you have any questions or comments.
Also, as a reminder, we have moved to a new office, with a nice sized conference room to use for our meetings and updates. If you do not feel comfortable coming into our office, we recommend that we possibly set up a Zoom or teleconference call to update your planning numbers, especially if it has been more than a year since we have last done so. Please feel free to reach out.
For everyone - If you desire an appointment, have any questions on any of this material, or any other financial subjects may relate to your own financial circumstance, please reach out to us at the contact information below:
Sincerely,
Direct phone: 631-923-2485
This communication is from Landmark Wealth Management, LLC, a Securities and Exchange Commission Registered Investment Advisory firm. The information in this email is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax, legal, or investment advice from an independent professional / financial advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Information and use of materials contained in this email, including text and attachments, is confidential and is for the use of the intended recipient(s) only. If received in error, you are hereby notified that any dissemination, distribution, or copying of this communication, or any of its contents, is strictly prohibited. If you have received this communication in error, please reply to the sender and delete the original message and any copy of it from your systems. Be also advised that email communications are not secure. All e-mail sent to or from this address will be recorded by the Landmark Wealth Management, LLC email system and is subject to archival, monitoring, and inspection pursuant to securities regulations. Please direct any matters regarding this policy to info@landmarkwealthmgmt.com.
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Landmark Wealth Management, LLC
95 Broadhollow Road, Suite 102
Melville, NY 11747
(631) 923-2485
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