Broker Check

July Newsletter

July 20, 2022

Here we are, halfway through July, thankfully having put the first half of 2022 behind us. As media pundits have espoused, the first half of 2022 was the worst performance for both equity and bond markets since 1970. The S&P500 finished that six-month period down 20.6%, the Nasdaq down 29.5%, and bonds, represented by the Bloomberg Aggregate Bond Index fell 10.4%. Just about the only things that rose were the U.S. inflation rate, +9.1% for June, and the Federal Funds Rate, which rose from 0.0%-0.25% in January to 1.25%-1.5% in June, with more hikes likely as the Federal Reserve attempts to slow the rate of inflation, and the economy.

The questions on everyone’s minds now seem to be:

  • How much worse can the markets get?
  • Will there be a recession? (If we’re not already in one)
  • When will it all be over?

Unfortunately, we don’t know the answers to those questions. Neither does anyone else, despite what you hear on T.V. or read on the internet. Recessions and Bear Markets are only identified and labeled in hindsight, and no one has predictive abilities.

What we do have is the ability to prepare.

As you may recall, In January we added a market-neutral strategy to our portfolios, increased the quality of our bonds, and reduced bond duration (a measure of how sensitive bonds are to changes in interest rates). Subsequently, we significantly outperformed the indices, and many of our peers, during the first half.

This helped preserve capital during drawdowns without sacrificing the ability to participate in upside rallies.

Given the current environment, and what we believe is likely to be a challenging second half of the year, we have made additional adjustments to our portfolios.

  • First, we replaced our Large Cap Growth manager, moving away from technology and economically sensitive industries, implementing a strategy focused on high-quality, cash-rich companies with resilient business models.


  • Second, we reduced our overall equity exposure by decreasing Mid and Small Cap stocks, which enabled us to add a second market-neutral strategy, further reducing our market risk.


  • Third, and lastly, we reduced our allocation to international markets and replaced our growth-oriented manager with two dividend-focused strategies. The focus on dividends can help offset downside risk and add a consistent return stream from those dividends to help offset the volatility we are seeing around the world.

We will continue to monitor events around the world, and keep a keen eye on policy here in the U.S. Our goal is always to be prepared for whatever unfolds, and to be proactive rather than reactive. We firmly believe that we are well positioned for whatever comes next.

As always, if you have any questions or concerns, please reach out to our team.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All indexes are unmanaged and cannot be invested in directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.