The second quarter has ended and we are now halfway through 2022. The stock market has had its worst start since 1970. I was not even alive in 1970, however, I have been a financial advisor since 1999 and have seen a number of stock market ups and downs including multiple recessions.
Back in our March 2022 newsletter, we wrote about how cash is king and could be for the next few months or even longer. In December 2021, we sold some equities since the stock market was making new highs and converted those proceeds to cash. In the beginning of March, we sold more since it looked like equities could continue to struggle for some time. At the end of the 2nd quarter, the S&P 500 was down 20%, Nasdaq down 29% and the Dow down 15%. Even fixed income (bonds) are down more than 10%. The markets are struggling but this is a good thing for long term investors as we are now putting new money to work at a lower price point. Towards the end of June, we did put a little of the cash back to work in both equities and fixed income in our portfolios, but we still have more cash than we typically do.
Over the next six months, we plan to decrease our cash holdings and increase our equity and fixed income concentrations. We will be investing the cash back to work for the long term. We believe the markets will remain choppy for the near term since we are facing some big headwinds like inflations, possible recession (we believe we may already be in a recession), world events and higher interest rates just to name a few things but this provides us with an opportunity to make money in the long run.
The stock market price tends to be about six months ahead of where the economy is. We do see some opportunity here and it may become even greater in the coming months. Historically, the summer months are slow but as we move into the fall and as the year begins to end, we should find some great bargains as we head into 2023. Remember that investing for the long term is a marathon and not a sprint. Enjoy your summer!
Spencer Neal, AIF®, C(k)P®