Broker Check

Curo Client Letter: 2022 Challenges

October 06, 2022

At the risk of stating the obvious, 2022 has been very difficult.  You know the reasons all too well: inflation running persistently hot, interest rates increasing due to an aggressive Federal Reserve (Fed), the war in Ukraine, recession talk, a bear market, and mid-term elections about six weeks away.  It’s also been extremely unique - not only in the number of challenges we are facing as investors and global citizens, but also in the year-to-date (YTD) performance of almost every single asset class we track.  As of September 23, 2022, all of them were negative YTD with the exception of commodities.  To be clear, that’s many different types of stocks and bonds; international and domestic, and real assets.  In fact, it’s only the third time since 1950 that stocks and bonds were negative the first half of the year.  Very difficult indeed.  

On top of being a tough year, 2022 has reminded us of something extremely important: predicting short-term events and market movements is impossible.  If you don’t believe us, here’s a short list of recent events no one predicted:

  • The invasion of Ukraine by Russia: most of the millions of words written by journalists and pundits leading up to the actual invasion stated that Putin wouldn’t actually pull the trigger
  • On the invasion itself: millions more words were written to the effect of Russia destroying Ukraine in days – weeks at most. Wrong again (August 24th marked six months since the invasion)
  • A 40-year spike in inflation, almost overnight: while many industry experts predicted that the drastic expansion of the M2 money supply would lead to an increase in inflation, no one predicted the firestorm we actually got
  • Surging recession risk and an interest rate spike: given that no one predicted the severity of the inflation surge, no one could have predicted just how aggressive the Fed would get, thus bringing the very real risk of recession to the forefront  

This list can be added to the long list of events no one predicted in 2020 (the pandemic itself, the lockdown, a short but deep recession, the bear market and its speedy evaporation).  I think you get our point.  Despite us being students of our industry, reading research, and listening to economists, strategists and analysts, the hard truth is that we cannot know things that cannot be known.  But here’s the good news: by the time today’s unknowables have resolved themselves, (1) the stock market will already have risen to discount that resolution, and (2) the world will be on to a whole new and different set of unknowables. 

We always come back to our tried-and-true approach: we are goal-focused, planning-driven, long-term investors.  We are here to help clients reach their goals and guide them through their lives.  Once we have a plan in place and a portfolio which we believe is optimally suited to that plan, the only reason we should change that portfolio is if our goals have changed – not due to current or anticipated economic, financial and/or political conditions.  Afterall, when we invest in stocks, we are investing in companies and superior companies will – as they always have – find a way to prosper regardless of circumstances.

Thank you for allowing us to be of service to you and your family – it is a privilege.  We are here for you if you need us, so please reach out anytime.