Looking Ahead in 2022

One thing is certain: numerous predictions about 2020 and 2021 in categories ranging, from the emergence of a pandemic, to continuance of the pandemic, how best to cure the pandemic, to rates of inflation, supply and demand in the economy, to the ability of technology to make accurate predictions… were wrong.

Possibly the largest factor affecting the US economy today, inflation, was not even on the list of biggest risks at the 2021 World Economic Forum.* This is not to poke fun at the predictors but rather an indication of how misguided predictions about risk can be.

Numerous predictions about 2020 and 2021 were wrong.

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Markets Prefer Certainty

Amidst the continuous stream of news and recent market fluctuations, a dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

Several factors are at work –

  • interest rates, per the US Fed
  • future government spending policy
  • rates of employment
  • market valuations

among other factors.

A dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

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2021 What A Year So Far

Wow… year-end 2021 is fast approaching. As if 2020 was the year we all wanted to turn the page… it is deja vu all over again in 2021. BUT a positive spin can still be put on year-to-date 2021, especially with respect to market returns.

It may be too early to say that stock market gains, to date, have been better than decent in 2021. From the US small-cap index up 12%, to large-cap S&P 500 up 22%, to Nasdaq up 19%, to the Dow Jones up 13%, these are all solid year-to-date returns.

Take the time before year-end to evaluate portfolio gains and asset allocation.

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Investing in the Next Facebook?

How many people caught the news last week that Facebook officially changed its corporate name to… Meta? And changed its stock ticker symbol to MVRS? Presumably, MVRS is short for “metaverse.” What is the metaverse and is it the next “hot” investment? (In other news, Facebook is looking to distance itself far, far away from discoveries that the company knew full well for over a decade the damage its central social media platform would inflict and has inflicted on people of all ages, especially children. But that is not the topic of today’s TGIF 2 Minutes.)

Regarding Meta, CEO Mark Zuckerberg says succinctly, “the metaverse will be the successor to the mobile internet.” Gaming and alternate reality seem to be at the forefront of the concept with bitcoin and cryptocurrency central as well. The whole thing sounds huge.

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A Couple of Quick Notes

This note would be even better in a short video…so stay tuned for that version next week! In the meantime, a couple of quick written notes:

This week the “Energy Information Administration,” an actual division of the US government, warned that nearly HALF of US households who heat their homes with natural gas will pay 30% MORE this year, yes 30%, versus last year.* AND that if winter is 10% colder, then bills will go up 50%! If winter is 10% warmer, then bills are still projected to go up 22%. Can’t wait for that cold weather!

Nearly HALF of US households who heat their homes with natural gas will pay 30% MORE this year.

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Reacting Can Hurt Performance

As they say, “a picture is worth 1,000 words.”* Please do whatever you need to do with your phone or laptop to make sure the graphic below is visible. And make sure to ZOOM IN or turn the phone sideways (or ask me to send you the PowerPoint or PDF version of this slide).

With that said, the title of the slide is: Reacting Can Hurt Performance. And here is a question,

Who is NOT scared these days or after this week?

Savings and investing decisions need to have been made before today. Reacting can significantly hurt performance.

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Try This If Markets Get Rocky

A timeless set of advice originally appearing in August 2014, again in January and October 2016, again in February and October 2018, August 2019 and as recently as May 2021… it can be wise to do a “gut check” on how extensively a rocky or down stock market could affect your emotions – and more important, your actions. There may be reason to establish a pattern of performing this exercise one to two times per year.

Adapted and shortened, “Gut Check in Rocky Markets,” can be applied to the times we are experiencing today in late August 2021, amidst US and global uncertainties of the geopolitical and pandemic variety. The central message stands:

It can be wise to do a “gut check” on how extensively a rocky or down stock market could affect your emotions – and more important, your actions.

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Inflation is Here

Long time readers of TGIF 2 Minutes may remember the above photo* which accompanied a February 2018 post describing how inflation feels.

Earlier this year in March, a TGIF 2 Minutes post titled Get Ready for Corona Inflation described what could happen if government spending and stimulus continued unchecked. This week’s reported economic numbers underscore reality: a three-month continued surge in inflation that in several categories has not been seen since the early 1980’s. Lots of people reading this post may not have even been born in 1981 – which was the last time that restaurant meals and food prices rose this fast. To the younger generation, inflation may be learned painfully early in their careers. Inflation hurts EVERYONE, most of all the middle class and low-wage workers. For the wealthier, inflation gradually eats into returns on savings and investments.

Photo by Jared Haworth, www.wehadtoday.com/jared

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CYA – But it’s Not What You Think!

This week brought long-awaited although not unexpected news from the US Federal Reserve Board: Fed officials expect to raise interest rates from the current level of “near zero” by the end of 2023 instead of sometime in 2024. Earth-shattering? NO. Cause for paying attention? YES. Even though 2023 seems fairly distant, interest rates have already begun to increase. It is not too early to pay attention to, review, and understand your overall Asset Allocation. Thus, today’s title, “CYA”. Cover Your Asset Allocation.

As quick background, the US Federal Reserve System, or the “Fed”, has as its mandate to maximize US employment and allow for stable prices. Its primary tool for accomplishing these goals is the setting of short-term interest rates – which then translate into to interest rates for anything from 30-day Treasury bills to 10-year Treasury notes, to 15- and 30-year mortgages. Even debt issued globally watches the Fed’s interest rate policy.

Fed officials expect to raise interest rates by 2023. It is not too early to pay attention to, review, and understand your overall Asset Allocation.

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Portfolios & Back Pain

Have you ever had back trouble? Boy can it be a pain in the ### (pun intended). Recovery is usually possible by seeking – and taking – proper advice and treatment. Believe it or not, there is a way to relate the recovery process from back pain to the recovery and durability of investment portfolios. Stay with me here!

I will credit my excellent physical therapist, who knows very well my profession as a CFP®, for coming up with the concept. He said to me, “like your advice about my 401k allocation, the physical strength work a person does for years can make recovery from back trouble much swifter and even easier.” Hooray! While the recovery process for a person’s back can take several weeks to several months, the recovery process for properly positioned investment portfolios has been actively taking place for over 12 months and could continue over the life of a portfolio.

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