Q3 2022 Financial Management Newsletter

Inflation, inflation, inflation. The theme that dominated the first half of the year continued into Q3 and we expect it will for the foreseeable future. Persistent pressure in terms of ongoing inflation forced central banks around the world, including the Federal Reserve (the Fed) here in the U.S. to tighten monetary policy, the likes if which we haven’t seen in well over a decade. Despite a mid-quarter rally from June to August markets as measured by the S&P 500 index slid back into bear market territory, ending the quarter below the benchmark level of support set in mid-June.

As a result, almost every asset class suffered and questions remain as to how long the U.S. economy can weather higher interest rates.

We encourage you to visit the link below for a more in depth look at inflation presented by Kathy Jones at Charles Schwab just last week.

As we’ve reported in our Weekly Market updates, both the Tactical Allocation Portfolio (TAP) and Sector Equities (SEC EQ) models fared far better than the S&P 500 over the course of Q3. We headed into early-June in cash heavy, risk management mode and despite testing the mid-quarter rally with a handful of new positions, ended the quarter in similar fashion. Cash has been king since very early in the year, a trend we anticipate will continue. We took a similar approach within blended models for our fixed-income investors maintaining exclusive allocations to 3-month U.S. Treasury bonds. Similar to cash on the equity side, an approach aimed at reducing interest rate risk to a bare minimum.

In terms of a looming recession, we will default to another trusted resource in Brian Wesbury, Chief Economist at First Trust Portfolios whose take we have shared on our website in the past.

Overall, we feel it is safe to say volatility is here to stay. Above average returns of the last few years will be much more difficult to realize. The probability of recession at some point in the intermediate term future is likely. And the Fed will continue to tighten until the economy simply can’t absorb higher interest rates. We know this is unsettling and are here to help gage how it will affect you, your family and your future plans. We welcome your questions, comments, concerns and hope you find comfort in the models we have spent the last 15 years building and refining.

The interpretations and organization of these ideas are the confidential thoughts of 1st & Main Investment Advisors and do not represent the opinions of Berthel Fisher & Co. Financial Services, Inc. nor BFC Planning, Inc.
Our firm does not provide legal or tax advice. Be sure to consult with your own legal and tax advisors before taking any action that may have tax or legal implications.
Different types of investments involve varying degrees of risk including market fluctuation and possible loss of principal value. There can be no assurance that any specific investment strategy will be profitable.

Latest News