We hope you are enjoying this beautiful time of year.  We wanted to share insights that we think will be helpful to you in keeping your investment and financial plan in perspective.

Recession:  Have you heard?  A slowdown is coming.  If it does appear, this may be the most telegraphed slowdown (or recession) in history, as it’s all over the news.  The Federal Reserve’s (Fed's) aggressive interest rate increases have begun to achieve their goal:  inflation is decreasing.  Headlines about this can be scary, but recessions are necessary for the long-term health of the economy and are a natural part of our economic cycles.  They help reduce the chance that bubbles form and burst as we saw in 2008.¹

History of U.S. Bear and Bull Markets Chart:  As you’ll see below, history has been on our side if we are long-term, rationally optimistic investors.  Compare the blue growth cycles to the yellow down markets. Growth cycles have been quite profitable for those who were actually present and invested over time.²



One must have faith in the future to be a great investor. It’s good to stay informed, but we must recognize that positive events are generally downplayed in the news.³

Periods of Disturbance and Change are Normal:  
Our economy is in a transitional phase, where some industries shrink and others expand.  It’s the very nature of capitalism.  Companies are rebuilding supply chains and on-shoring manufacturing.  They are integrating the latest innovations and technology to increase efficiency.  We believe every market disturbance creates an opportunity.  Especially during weak cycles, our portfolio managers focus on quality companies, with strong balance sheets and the ability to pay growing dividends.⁴

Information on the Economy and Markets from economists and analysts we follow:
Expect a Slowdown:  Recession or not, economic growth is expected to be muted this year. However, slow periods are normal and healthy for markets.⁵

Inflation: Fed actions are working. Inflation is gradually falling to more manageable levels.⁶

The U.S. Dollar:  The dollar is expected to start a cycle of weakness, but remains a perceived safe-haven asset.  It’s important to know the dollar moves in long alternating cycles of strength and weakness typically lasting nine years on average.  Portfolio managers often invest more in high quality international companies to take advantage of weak dollar cycles.

Supply Chains:  They have reached more normal levels since the COVID global economic shutdown.⁷

Banking Sector:  The overall U.S. banking system still looks healthy.⁸

The Fed’s New Payment Service:  In March, the Fed announced a new payment service called “Fed Now.”  This is not a Central Bank Digital Currency or CBDC.  It is a new payment service that will complement existing payment systems, enabling consumers to send money instantly, even on weekends and holidays.⁹

There are Opportunities:  After markets fell in 2022, there are a number of areas in the markets that appear to be attractively priced, relative to their 25-year average price histories.  Managers are focusing even more on the fundamentals of company strength, profitability, and attractive valuation.¹⁰

Feeling Negative:  We are in a normal period of “low consumer sentiment,” where investors generally have a gloomy outlook.  History shows that investors who sell during periods of low sentiment miss opportunities, i.e. the growth cycles that follow periods of weakness.¹¹

When do Markets Typically Turn Back Up?  The market is forward-looking, while economic indicators are backward-looking.  Markets anticipate the future prospects of companies, so last year, when the economic indicators were still positive, the market was already pricing in a slowdown in the global economy.  History shows that during downturns the markets begin anticipating a recovery, turning up approximately six months before the actual economic indicators improve.  The turnaround often comes when sentiment is the worst.¹²

How to Remain Steadfast and Follow Your Plan:

• Avoid the temptation to let “how you feel about the world” derail your plan.  While we may be feeling negative, the portfolio managers we work with look for opportunities to position portfolios for the next economic expansion.
• Review your financial and investment plans with us if you are tempted to think short-term about your long-term goals.  Reduce media exposure and, therefore, the constant negative messages.
• Monitor whether media messages leave you in a state of continual anger or pessimism.  Consider how that may affect not only your ability to follow your plan, but also your ability to enjoy life.

Benefits of Being Balanced:  If you have a balanced portfolio, you have the opportunity to participate in the growth potential of the businesses you own in your accounts.  You also earn dividend and interest income.  Finally, because you are balanced with bonds, stocks, cash, and alternatives, you mitigate the potential for taking the full brunt of market downturns.¹³

What a Beautiful Time of the Year!  We Hope You’ll Have Time to:

• Spend time in nature and with the people you love.
• Savor each day, remembering we each have a finite number of springs on this planet.
• Reach out to us when you have concerns that affect your situation and financial plan.
• Disconnect more often from news and social media to feel less fearful and negative. 
• Refer often to the chart above and remember that great investors have faith in the future.

Please know that we are grateful for you and that we appreciate the trust and confidence you place in our team.  Let us know how we may be of service to you and your family.

Warmest regards,

Magay Shepard, CFP^®
Managing Director/Investments

Dan Emmons, MBA, CFP^®
Financial Advisor

  
<sup>Past performance is no guarantee of future results.  Changes in market conditions or a company’s financial condition may impact a company’s ability to continue to pay dividends, and companies may also choose to discontinue dividend payments.


1</sup> J.P. Morgan Asset Management, Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023.
² J.P. Morgan Asset Management, Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023.
³ J.P. Morgan Asset Management, Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023.
⁴ Capital Group, Long-Term perspective on markets and economies 2023 Edition.
⁵ J.P. Morgan Asset Management, Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023
⁶ J.P. Morgan Asset Management Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023, Point #5.
⁷ Capital Group, Long-Term perspective on markets and economies 2023 Edition.
⁸ J.P. Morgan Asset Management, Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023, Point #1.
⁹ Stifel’s Michael O’Keefe’s latest Insights Report, week of April 24 Sight | Lines.
¹⁰ Capital Group, Long-Term perspective on markets and economies 2023 Edition.
¹¹ J.P. Morgan Asset Management, Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023, Point #11.
¹² Capital Group, Long-Term perspective on markets and economies 2023 Edition, page 2.
¹³ J.P. Morgan Asset Management, Global Asset Allocation Views.  J.P. Morgan Asset Management, Guide to the Markets March 31, 2023. MFS Quilt Chart.