Mid Year Update - 2022

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The current market environment is about as challenging as any we can recall in the past 40 years. A global pandemic, war in Europe, emboldened geopolitical adversaries, potential food and energy shortages, unprecedented monetary policy decisions, political divisiveness, and runaway inflation give all investors plenty to worry about. The question on everyone’s mind is what happens next.

Our goal in this mid-year strategy update is to connect the dots and offer a logical interpretation of current economic and market data. The insights presented in this report will build upon our monthly commentary (The Private Client Letters) and our Spring Symposium presentations. This report is a vital component of a continuous dialog with clients and our unwavering goal to “achieve clarity in a complex world.”

We could never have imagined 16 years ago when we adopted this tagline how complex the world would become. That said, we have always known that achieving clarity would be the greatest responsibility we would have for our clients.

July Private Client Letter

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July Private Client Letter

The S&P 500 suffered its worst half since 1970 after inflation and recession concerns sparked a 21% sell-off. This year’s first half performance was strikingly similar to that of 1970 (also down -21%) and in both periods, high inflation was the issue. It is interesting to note that the second half of 1970 saw the S&P up 27%. Of course, that does not mean that's how it will go for the back half of 2022; however, we believe it is likely the market will move higher if inflationary pressures subside.

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Estate & Wealth Transfer Strategy Considerations

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Estate & Wealth Transfer Strategy Considerations

The current Federal Estate Tax exemption is approximately $24 million for a married couple (half for an Individual) inclusive of portability. Readers should note: no legislative action is needed to effectively cut the exclusion amount in half at the end of 2025. Meaning, the Tax Cuts and Jobs Act (TCJA) of 2017 automatically reverts without the need for Congressional vote.

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Our Next Economic Tailwind – Demographics

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Our Next Economic Tailwind – Demographics

As of 2019, the Millennial generation (those born between 1981 and 1996) officially surpassed the Baby Boomers as the largest living population group in the United States (Source: Pew Research). While much of our commentary and attention focuses on current trends and data, it can be easy to be so focused on the here and now that larger structural trends, like demographic trends, go unnoticed. While these current trends and data are critical for making tactical investment decisions, it is also important not to miss the forest for the trees given the time horizons our clients are typically working with.

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June Symposium Recording

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To say that 2022 has been a rocky year thus far would be quite an understatement.  The selling pressure for both stocks and bonds has been historic and investor sentiment is at all-time lows.  The good news is that prior periods of extreme stress have typically been followed by better than average returns in the year ahead.

Over the course of our Symposium season, our live presentations have attempted to make sense of this difficult time.   Last week the final 2022 event was recorded and is available for replay below.  This presentation provides an in-depth overview of our current perspectives and expectations for the balance of the year.

Please feel free to call us should you have any questions.

Special Market Update 06/17/2022

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Special Market Update 06/17/2022

The Federal Reserve has announced an interest rate hike of 0.75% to the fed funds rate following their June meeting. This decision was in response to persistently high inflation data and was widely expected. The Fed is now predicting at least three more 50 basis point increases and one 25 basis point increase by year's end, which would put the Fed Funds rate at 3.40%. They also see rates at 3.8% by the end of 2023. And oddly, they suggested they may cut rates by 25 basis points in 2024.

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Financial Health Check Up

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Financial Health Check Up

Similar to organizing an annual appointment with your doctor to ensure that you are physically healthy, a regular financial health check-up will help ensure that your financial health is strong.

The benefits of completing a “financial health check-up” are numerous, the most important is determining whether you are well positioned to meet both your short and long-term financial goals. Other important areas to review on a consistent basis include your ability to cover your ongoing cash flow needs and how to protect you and your family financially in case of an emergency.

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Strategies for Investing During a Market Downtrend

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Strategies for Investing During a Market Downtrend

Investing during down markets takes focus and fortitude. Most investors understand the simplified concept of “buy low and sell high”, but human nature can create doubt and frustration when you don’t see the positive returns you’d like. When looking for investment opportunities during a down market, it’s important to not only look at what and when to buy, but also how. Here are several investment strategies to consider.

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May Private Client Letter -

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May Private Client Letter -

Just when we think things can’t get any worse in this market, another wave of selling rushes in and prices go lower. Making matters worse, every attempt for a rally in the broad indexes has been quickly turned back as stocks grind lower. With four months of 2022 now in the rearview mirror, a lot of damage has been done in equities with declines of about 10% for the Dow Jones Industrial Average (DJIA), 13% for the S&P 500, and 23% for the NASDAQ.

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Summary of Clearwater’s Portfolio Strategy Adjustments

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Summary of Clearwater’s Portfolio Strategy Adjustments

Much has happened over the last 16 months in the global economy and the capital markets. As is our practice, Clearwater Capital Partners (CCP) has proactively adjusted portfolio strategies along the way. While this activity is communicated to clients in real time, it may be difficult to maintain a broad perspective given the vast amount of activity. Accordingly, below is a high-level summary of CCP’s investment strategy adjustments beginning in 2021.

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Beware of Behavioral Biases

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Beware of Behavioral Biases

The volatility experienced in 2022 has some investors sitting on the edge of their seats. While the is S&P500 down 14% YTD, it may be even more alarming that we have seen already 2 major drawdowns of >10% in just the first 4 months. Anytime investors experience volatility like this, there is a natural urge to consider a strategy change. Should I go to cash? Should I re think my allocations? These are natural strategy questions because, as humans, we can’t help but combat the urge to “do something.”

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Think Stocks are Volatile? Take a look at Bonds

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Think Stocks are Volatile? Take a look at Bonds

Did you know the Aggregate Bond Market (as measured by AGG) and the Dow Jones Industrial Average are both down almost 10% year-to-date 2022? If investors think stocks are volatile, they need to consider bond price action as certain segments of the bond market can be just as volatile as stocks when requisite conditions exist.

All too often bonds are viewed with a homogenous lens; however, bond markets are bigger and broader than equities and need to be approached with precision to identify opportunities for gains, but also avoid unnecessary losses during times of market stress.

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John’s Reading List – "Why We Sleep" - April 2022

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John’s Reading List – "Why We Sleep" - April 2022

It is not often that I am able to recommend a book as life-changing, this one is. Why We Sleep is simply a must-read for those seeking a more healthful and productive reality.

Matthew Walker is a professor of neuroscience and psychology at UC Berkeley, the Director of its Sleep and Neuroimaging Lab, and a former professor of psychiatry at Harvard University.

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April Private Client Letter

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April Private Client Letter

The capital markets have been operating in a nervous phase of uncertainty and volatility from the beginning of the year. Investors have been unable to gain any meaningful traction as nearly every traditional asset class has been under pressure.

We are seeing a large-scale conflict between favorable economic data and decent corporate earnings, with a decades-high rate of inflation and the appalling war in Ukraine. Economic fundamentals and growing corporate profits would normally be net positives for the markets. However, high inflation is quickly driving tighter monetary policy and higher interest rates. This, along with ongoing geopolitical distress, are net negatives for the markets.

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Too Conservative is Risky

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Too Conservative is Risky

Too Conservative is Risky. Yes, you read that correctly – being too conservative can be risky.

Risk of what? Loss of value. Although volatility of financial securities is a reality, the loss of value is different. Ups-and-downs of security market prices happen, known as volatility, and is reflected mathematically as standard deviation. These statistics are helpful measures for evaluating relative risk-adjusted returns over time. However, the absolute risk of loss of value is when negative volatility (periods when prices are down) is made permanent.

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Proposed Act Further Extends RMD Age

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Proposed Act Further Extends RMD Age

A bipartisan follow up to the Secure Act, the largest retirement saving legislation update since 2006 which was signed into law in December of 2019, passed in the US House of Representatives on March 29th. Dubbed the Secure Act 2.0, this new legislation builds off many of the changes brought by its predecessor in an effort to improve retirement savings rates

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Yield Curve - What’s Going On

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Yield Curve - What’s Going On

With the recent flattening of the yield curve, investors are beginning to get flashbacks to 2018 when the “inverted yield curve” was stamped across every financial rag. It is a legitimate pause point, as almost every recession has been predated by an inverted yield curve.It is crucial to follow up this up with the fact that not every yield curve inversion has actually led to a recession. In an analogy by Bespoke, “it is kind of like the square-rectangular phenomenon whereas in a square is always a rectangle, but a rectangle isn’t always a square.

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