The first half of 2022 has been the most challenging 6 months in my 31-year investment career. We have experienced unprecedented market volatility due to inflation, the war in Ukraine, lingering Covid variants and continued supply chain disruptions. This has resulted in a 6-month barrage of bad news headlines along with the worst market performance in all areas of investing over the past 50 years. Over 70% of the stocks in the Nasdaq index are down anywhere from 60%-90%, along with 4 out of 5 stocks in the S&P 500 index down this year. With all major indices down and bonds losing value, it has become an exercise of owning "what's losing less." This is why we were so aggressive last November in making allocation changes to so many of your portfolios, resulting in unusually high capital gains. During this time, pessimism for investing has never been higher in my career, and I can't remember our team working any harder since I started.
Prior to June 6th, we were in great shape while invested in high dividend energy stocks and midstream energy ETF's (Exchange Traded Funds) that made up almost 40% of our investment portfolio. Then, that entire sector corrected 20%-30% lower for no reason whatsoever. However, we still own all of them because the dividends generated are between 7%-10% and we are essentially being paid well to wait for the prices to recover. Also, these holdings are raising their dividends, giving us another reason to continue owning them. Recently, gas prices are starting to decline from their latest highs, inflation is also beginning to decline from its 40-50 year peak, and the Fed is also raising interest rates to help slow inflation. We may be starting to see the light at the end of the tunnel.
What do we now? All our portfolio statements won't make us happy right now, mine included. So, what is the plan going forward? One of the many things I've learned in investing for 30+ years is that reviewing your current plan in the environment we are in is the first step. It's easy to review plans when the markets are all going up, but it is necessary to review when conditions are rapidly changing, and uncertainty is much higher. So, let’s get ready for reviews by scheduling some time with us in person, over the phone, or a web meeting. We actively manage your money to meet your goals, not to keep up with random indices or invest in the latest fads.
For the second half of the year, we are looking for energy prices to remain high at $85-$125 a barrel for oil. We continue to have tight supply and steady demand with no new refineries being built and all of them operating at full capacity. With the midterm election on the horizon, potentially resulting in a more "gridlocked" government, market concerns related to politics should also ease. Many great "blue chip" companies are “on sale” due to the market pullback in the first half, and we may start slowly adding some of these into your portfolio over the next 6 months.
In summary, remember that the height of pessimism has always been the height of opportunity too. There will be no "bell ringing" ceremony to say it's "all clear" and that today is the day to invest your money according to your plan. I feel very strongly that taking advantage of this current market by reviewing your plan and continuing to invest accordingly will give us a chance to look back 3-5 years from now with a very good probability of being much happier with our account balances and our financial goals.
On behalf of our entire staff at Golden Corner Wealth Advisors, we value our relationship with you and endeavor to provide you with quality services to suit your individual investment needs. Please call or email us to schedule your financial plan review at 864-888-8700.
In August & September we will be slowly moving to a new building, about a mile away from our current location in Seneca. This will be our new permanent location and we look forward to meeting with you there later this year and on into the future. We are hopeful to have a trust and estate lawyer along with an accountant in the building with us, and hope that continues to expand our opportunity to provide you access to additional experts to help in your long-term planning needs.