Market Commentary – October 2022

Here We Go Again

Mark Twain once observed that history doesn’t repeat itself, but it rhymes. Perhaps the same could be said of Bartlett’s commentaries. The latest rhymes with the message we sent in July and April because the viewpoints articulated then are just as relevant and timely now. We hope any lack of originality is offset by consistency!

Bear Market

The “Bear Attack” poem states: if it is black, fight back. If it’s brown, lay down. If it’s white, say goodnight.

What color is a bear market? Red, we suppose, which usually signifies declines and losses. Whatever the hue, market conditions suggest many are in “lay down” or “goodnight” mode. Such a posture is understandable given a litany of woes throughout the world: high inflation, rising interest rates, war, diplomatic tensions, an energy crisis in Europe, business disruptions, and environmental catastrophes.

Bartlett believes a bear market should be handled with a combination of objectivity, discipline, and fortitude. Perhaps this puts us closer to “fight back” position. We are resolved to maintain good investment holdings while being alert for buying opportunities created by market distress. Over the long haul, we want our clients to benefit from occasional market disruptions, rather than being threatened by turmoil.

Resilience Checklist

Time-tested principles have helped us navigate prior market declines and are fortifying our resolve today.

  • Falling markets should not disrupt a careful financial plan. The current selloff is the ninth bear market since 1990. Because turbulence is inevitable, safeguards should be carefully maintained based on factors including risk tolerance and withdrawal needs. A silver lining to recent market conditions is that higher interest rates allow for much better prospective returns on bonds and cash. These less volatile assets are very important in balanced portfolios.
  • America is a good bet. A recession may be underway as of this writing; it would be the fourth since 1990. But these are usually brief, and the economy is in growth mode almost 90% of the time. Therefore, we think a wise investor should focus on long-term progress rather than occasional interruptions.
  • Investing is a marathon, not a sprint. Notwithstanding frequent market drops, long-term investing has been lucrative. Using the S&P 500 Index as a proxy, stocks provided an annualized return of almost 10% since 1990. This handsomely rewarded those who stayed invested when tested by turmoil.
  • Patiently own great companies. Long-term equity investors have been amply compensated because stock prices have paralleled increasing corporate profits and dividends. These growth factors are vital in our ongoing research efforts, as we seek to invest in vital companies with enduring competitive advantages.
  • “Time in the Market” is more important than “Market Timing.” Occasional turbulence makes “market timing” seductive for many. However, it is unreliable because the timer usually sells stocks after declines are underway and, even more important, repurchases later when prices are much higher.
  • Practice steady risk management, in good times and bad.  We believe in thoughtful fine-tuning and rebalancing of portfolios over time, not aggressive overhauls based on market forecasts.  We think more extreme methods – “risk on” in good times and “risk off” in bad times – are unreliable because they depend on assumed market timing prowess.

The above observations are all behavioral in nature. Reflecting on his investing success, Warren Buffett memorably commented that temperament was even more important than intellect. Indeed, how we react to good and bad times is more important than the actual market conditions.

Elite Company

We are pleased to share Bartlett’s recent inclusion in Barron’s 2022 Top 100 Registered Investment Advisors. This is very nice recognition for the professionals and administrative staff who work so diligently to maintain excellence in our investment management, financial planning, and client service.

Concluding Comments

We love our profession and know our work is made possible by your loyalty. We are always grateful for your confidence, but especially now as we navigate challenging market conditions. Bartlett has been steadily adding new clients this year. We hope you will recommend us to family, friends, and associates who could benefit from our services.

You can find out more about award methodology here.

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