Guardian Financial Partners
October 2022
Our mission is to help you Preserve Your Assets and Protect Your Lifestyle. Our newsletter aims to educate you on the economic environment and provide life perspective and financial planning ideas that can help you!
As always, your well-being is everything to us. If you have any questions about your financial or investment plan, please contact us anytime.
Quarterly Market Review
We thought it would be beneficial to share with you some key observations from three of our research partners, along with an outline of our conclusions.
iM Global Partners
a. Base Case Scenario – Recession in the next 12 months (LEI declining 6 consecutive months, inverted yield curve)
b. Stocks may not be adequately discounting earnings decline while bonds appear attractive with backup in yields
c. Modest reduction to stocks (2-5% depending on model) and added to bonds
Ned Davis Research Digest
a. Global Asset Allocation Current:
b. Still maintain that this is a cyclical bear within a secular bull, but that could change. Valuations look more attractive but not as cheap as at previous bear market bottoms. We’re currently seeing some of the broadest and fastest global central bank tightening, which raises the risk of a severe global recession. Still hold concerns on bonds – while all recessions have caused inflation and interest rates to come down, models do not show that interest rates have peaked yet.
Schwab Market Perspective
a. S&P 500’s forward price-to-earnings (P/E) ratio has collapsed this year, though it remains elevated relative to its longer-term average, as well as to levels seen during prior bear market lows. Given our view that Fed tightening will continue to slow growth and cool inflation, we believe the worst of the rise in bond yields is probably behind us for this cycle and that the more rapid and forceful Fed tightening is going forward, the higher risk of a severe recession.
Our Conclusions:
- Traditional stocks and bonds continue to get hit in the recent quarter, though we as a group are quite pleased with our proactive decision to reduce exposure to bonds and stocks in 2021 and incorporate private debt/institutional real estate/CLO equity (Alternative income sleeve) into our portfolio construction. As the economy weakens, we expect some defaults to occur in some instances but still believe that we will be able to earn a positive yield.
- Where we go from here is again truly dependent on how successful the Fed is in tapping the brakes on the economy as they try to stem inflation. Our read is that the economy is indeed in sluggish mode, and the Fed is close to an inflection point with rate hikes starting to cause tremors in the currency markets, financial plumbing, and housing.
If you have questions about your portfolio, please contact us anytime.
This Is Life- "Navigating Uncertainty"
Life Perspective from Pat Guinet, Founding Partner
Financial Planning and Wealth Management aren’t simply about money and numbers, there is an emotional component; the experiences we have day-to-day and how our lives are supported by our financial planning and investment goals. Presently, we’re all experiencing a weak stock market and quite a turbulent bond market, and the stress it is adding to our lives as we watch bonds and stocks decline. We are experiencing something that we haven’t seen in decades, and it’s only human nature to ask if this time is different.
We’ve all learned and expect life to bring challenges our way. How we deal with those challenges can be the difference between failure and success. The current environment is no different. We’ve been through the high inflation of the late 1970’s, the 2000 Y2K Tech Bubble, the 2008 - 09 Banking Crisis, the Crash of October 1987, and 2020’s COVID! Each of these events raised similar questions and concerns. Is this time different? Should there be adjustments made to our financial plans? Should we cut back on spending? How bad is it going to get? How quick will the recovery be?
It's human nature to ask these types of questions. It’s extremely difficult to come up with clear concise responses, but we can better cope by clearly understanding how this environment is impacting our lifestyle goals and our investments.
We have built a process at Guardian Financial Partners designed around dealing with these types of challenges, to keep you informed, and we hope to lower your level of concern:
Annual Financial Planning Reviews – Our financial planning reviews are designed to update your goals and make adjustments where necessary, so your information is current and accurate.
Portfolio Reviews – Our portfolio reviews are designed to keep you updated on how we are adjusting and managing your investments to meet the goals of your financial plan, but also to deal with the market environment that we are experiencing today.
We feel the more informed you are… the easier it is to deal with these types of life events. Whether it’s your Financial Plan or Portfolio Review, the information presented provides clarity and we hope for a level of comfort through being informed and updated. After all…. This time is “NOT” different, just another challenge in life and investing which we can help you better understand and navigate as part of the GFP family.
Education to Empower You
Halloween is just around the corner, and the current inflationary environment feels a little like "trick or treat." There are negative impacts of inflation, but there are some positives too. One major positive is for your Social Security retirement benefits. Did you know the Social Security Administration announced that the 2023 cost-of-living adjustments will be 8.7%? That is the highest increase since 1981! The program annually adjusts the benefit amount for increasing cost, and this high increase is a result of the high single-digit inflation every consumer has faced over the past year. People who receive Social Security benefits will be notified of their change in benefits in early December.
Social Security impacts nearly every person in retirement as is often one of the only sources of guaranteed income for retirees. Social Security can also be complex when understanding how benefits are calculated and when to turn on benefits. We have attached a guide to understanding Social Security below.
Click here to download the Social Security Field Guide
We are here to help and offer objective advice. If you would like to discuss any of these topics or any questions relating to financial planning and/or the markets, please click HERE and pick a time on our calendar.
