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Quarterly Client Update Q3 2023

It feels like summer is officially over in Chicago and the Bears awoke from their 346-day hibernation and finally won a game again.

While the weather changing and the Bears losing more than winning is predictable, the economic news has been anything but predictable. Consider the following, seemingly contradictory data points from the 3rd quarter.

  • US Stocks declined by -3.25%2 leading some to believe the long-awaited recession is coming
  • Crude Oil was up nearly 30%2, not exactly what you would expect if a recession was on the horizon
  • The 1-month treasury yield is 5.55%2 suggesting inflation is moving higher
  • The US TIPS index, which adjusts for inflation, declined -2.60%2 in the 3rd quarter
  • Gold, long considered a hedge for inflation, was down -5.16%2
  • Housing prices were up 2.1%3, despite rising interest rates

If you had to predict where the market was going next, which direction would you choose? The difficulty in making these predictions is why we don’t look to investment gurus when building portfolios. Investors are naturally drawn to predictions. We want to believe that someone can make sense of the world so that we can put our trust (and money) there and be relieved of the stress of investing. If you want to see what the same gurus (wrongly) predicted for 2022, you can find details HERE. Conversely, we believe that Volatility is the Price of Admission for long-term investors. There is simply no way to get the long-term rate of return of the markets without accepting the risk involved (which leads to the volatility). The desire to gain an investing edge to avoid losses or have outsized gains is why CNBC and Fox Business make money selling advertising. They are capitalizing on the emotional side of being an investor. Doctor Richard Feynman, the Nobel Prize-winning physicist, once said: "Imagine how much harder physics would be if electrons had feelings!" We think investing would be “as easy” as physics if we could remove emotions from the equation! But, investing will always be difficult, even more so when emotions drive decisions.

If we are not building portfolios based on current events, investment gurus, or economic conditions what are we doing exactly? We start by building a portfolio tailored to your unique situation. This includes your family, dreams, and plans for the future. The portfolio is designed to support your specific long-term strategy. We use highly diversified holdings, not picking hot stocks or timing the market, but rather focus on a balance of long-term growth and income. This focus helps avoid emotional decisions – remembering that on any given day the market is like a coin flip, with a gain being realized on slightly more than 50% of the days. As we move out to months and years, the probabilities drastically move in your favor the further out we go. Our job is to help you remain invested to keep those odds in your favor.

The US economy will experience another recession but trying to predict when that will happen and adjusting your portfolio to avoid investment losses is not possible. If you would like to discuss your investments and/or your specific situation in more detail, you can set up a quick check-in. For additional investment dialogue, you can join our next Market Update call on 11/28 at 4pm. We will send out a registration link soon and we welcome your questions.    

As always, we are here to help you. Please don’t hesitate to call or email at any time.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. 

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

  1. https://www.cnn.com/2023/09/28/investing/premarket-stocks-trading-government-shutdown/index.html#:~:text=The%20average%20return%20of%20the,government%20shutdowns%20has%20been%200.04%25
  2. Quarterly Market Review, Third Quarter 2023, Dimensional Fund Advisors
  3. https://dsnews.com/news/09-29-2023/rising-home-prices-mortgage#:~:text=After%20dropping%20or%20staying%20about,in%20Q3%20of%20last%20year
  4. https://browse.arxiv.org/pdf/1701.01427.pdf?utm_source=substack&utm_medium=email

Investment advice offered through Private Advisor Group, a registered investment advisor.