No Prob with Schwab

After three years of waiting and wondering about the transition from TD Ameritrade to Charles Schwab, the merger is complete, and it appeared to be No Prob. No websites crashed, no dramatic mix-ups or missing accounts, and no interruption of our important work serving our clients.

All client accounts were successfully transferred and their assets are now sitting in the eighth largest bank in the United States, Charles Schwab. Over the Labor Day weekend, $1.3 Trillion in assets and 7,000 investment firms moved in what one article is calling a “Snooze Fest.”

Why Charles Schwab and TD Ameritrade are celebrating a $1.3T snooze fest

Charles Schwab has proven themselves to be incredibly competent in the first inning of our work together with them. We’ve needed to call them several times the first week as we had questions about the new system. Even though 7,000 firms like ours moved to Schwab the the very same day, the hold times were shockingly short and we were able to find knowledgeable people to answer our questions. Another good sign for the future.

The next step in this transition is for us to get clients familiar with the new look and feel of Schwab. We’ll be getting out the call list shortly to reach out to everyone to see what questions they may have. 

Here are a few topics we’re planning to discuss:

  • Online Logins – Helping everyone who wants an online login get one.
  • Combining Logins – Helping combine online logins of families who’d like to see all accounts in one spot.
  • Paper Statements – Helping combine paper statements so that all accounts come in one envelope every month.
  • Distributions – Talking through distributions and contributions to accounts that might take an extra day or two to process. 

Please contact us if we can do something for you. We hope everyone had a great summer and we look forward to talking with you soon. 


Fourteen years ago I was dating a girl and a friend told me, “Tim, you’re peaking. Your search for a wife is over. You should put a ring on her finger before she gets away.” He was right. It was great advice, I took it, and now she’s stuck with me.

The peaking is even more obvious now!

The same advice could be given to Jerome Powell head of the Federal Reserve who is in charge of establishing interest rates. 

“J Powell, you’re peaking. You’re winning the fight against inflation. Inflation has peaked and so should rates. Stop raising interest rates before this growing economy gets away from us and we end up in a recession.” (I know, the metaphor’s kind of a stretch, but it’s the best I could do.)

Yesterday, inflation slowed again marking the 9th consecutive month of slowing, and the lowest reading in two years. Prices rose 5% from a year ago, down from 6% the month prior and peak inflation from last July is clearly visible in the chart below.

This is what the Fed has wanted to see happen since it started aggressively raising rates a year ago. To be clear, the target is 2% inflation and we’re still significantly above that. However, we’re much closer than we were last July thankfully and still trending in the right direction. This is good news because the Fed can HOPEFULLY stop raising rates now. 

So why does this matter? Inflation peaked, rates are peaking, and next stocks should peak. We want stocks to peak. (Has your cofusion peaked yet?)

Banking Crisis

One situation that tested nerves and stocks last month was a miniature banking crisis. A handful of banks got swept up in the drama as depositors have been pulling money out of their checking and savings accounts to earn more interest elsewhere. We’ve been doing this in our investment accounts as we move cash to CDs and Money Markets to benefit clients. When a significant number of people all do this at the same time it can put a strain on the banks.

Fortunately, this only affected a few institutions and no depositors were harmed during the crisis. The bank drama seems to have died down now and appears to be behind us. Warren Buffet was quoted recently that he would bet anyone $1 Million that no depositor would lose a single dollar as a result of this crisis. We agree. 


The merger between TD Ameritrade and Charles Schwab is going as planned and is now less than five months away. Schwab has set the date of September 4th, 2023 to move all clients from a TD Ameritrade account to a Schwab account. No changes will be made to your investments during the merger. 

There will be no paperwork or signatures needed to make the change. However, clients will start to receive notices of the changes from SMB and Schwab starting as early as this month. 

Again, there is nothing to fill out or sign. If a client does nothing, the account will move to Schwab and we will manage it just as we’ve always done. The biggest change will be that accounts and statements will have a TD logo on Friday, September 1, and a Schwab logo on the Tuesday after Labor Day, September 4. That’s pretty much the extent of it.

Please let us know if you have any questions or concerns about this.

We hope taxes didn’t hurt you too badly. Now that tax season is winding down we’re planning to call clients to touch base about all things financial. We look forward to talking with everyone soon.

Thanks for reading,

The Little Economy That Couldn’t

Thanks to Tony Robbins we all know about the power of positive thinking, but before Tony, came Watty Piper. It’s thanks to Watty 100 years ago and his Little Engine That Could that we often think optimism and positivity is what we need to be successful.  

But what about the Little Engine That Couldn’t? Did that train plagued with worry, fear, and pessimism make it over the hill? Based on the picture I found, it doesn’t look good. 

So how about the Little Economy That Couldn’t? What happens when negativity and pessimism take over? Can that derail an economy and stock market? 

Right now our economy is trying to get over the hump of a potential slow down from rising interest rates. Optimism is hard to find, the economic outlook is unclear, and the financial news is as pessimistic as ever, repeating “I think we can’t…avoid a recession, I think we can’t…avoid a recession.”

Self-fulfilling Recession

Our economy is based on consumer confidence. If people are confident they’ll earn income, they will SPEND, taking care of themselves and their families and investing in their future. This helps the overall economy grow. If they don’t have confidence, they won’t spend but will instead SAVE, just in case they lose their job. So, the fear of a recession can actually create a recession, or make a one much worse. 

Fear Turns to Hope

As of this moment, it appears a majority of people believe we will be, or are already, in a recession. A Forbes article in January said, “This is the most anticipated recession ever.” This is increasing the likelihood we’ll enter into a recession in 2023. 

This is concerning, but not surprising. This is the process during EVERY slow down. This is the process of life. Pessimism reigns until it doesn’t. Fear is a powerful feeling until it turns to hope. 

But as long-term investors, do we care?

As long-term investors, we’re less interested in the mood of the economy. We care about facts, not feelings, when we plan our investment strategy. We care about the Little Economy That Did. What did the economy DO? 

So far, the pessimistic predictions have not come true. The data is showing inflation has been coming down, consumers did not close their wallets, and earnings reports for companies have not been too bad. It turns out the economy is not as fragile as most thought. We’re once again glad we don’t make large changes based on emotion.

Emotional vs Fundamental

Emotional swings are typically short term, but fundamental moves based on inflation data, GDP, unemployment, retail sales… are longer term. We care more about the fundamentals of the economy and less about the emotions.  

This is why we try not to get overly excited when things go up, and this is why we were not overly pessimistic last year when things went down. Instead of making major moves, we tweak portfolios or simply hold steady during emotional swings. Below is an overview of some tweaks we’ve made to portfolios after a tumultuous year.


We have 3 main components we invest in for clients depending on risk: Guarantees, Moderate Funds, and Growth Stocks

Guarantees – These are products from banks or insurance companies that are some of the safest vehicles we invest in. We’ve seen the rates on these guarantees jump this year. We have been, and will continue to, incorporate these into portfolios as rates continue to rise.

Moderate Funds – Starting in September of last year we’ve started incorporating Buffered Funds into this portion of the portfolios. According to this category of fund is growing quickly because they help provide downside protection and upside participation in the stock market. These are great for retirees who want less risk than a portfolio of only stocks. A few different companies offer these funds but we’ve chosen to work with First Trust, a company we know and respect.

We’re also seeing money market funds paying a more reasonable rate of interest now that rates are higher. We’ve been buying these money markets with cash that clients have on the sidelines waiting to be invested. 

Growth Stocks – These more aggressive growth stocks were hit hardest last year but have bounced significantly this year. We’ve been slow to buy additional stocks in these accounts as we wait to see if the pessimistic prognosticators are right, and the stock market drops significantly. A larger portion than usual is sitting in money market funds in these accounts as we wait. 

Schwab Transition

Finally, we have an update on a long standing merger between TD Ameritrade and Charles Schwab. This year over the Labor Day weekend, all of our TD Ameritrade accounts will be changing to Charles Schwab accounts.  

This has been in the works for two years now, and it doesn’t appear there will be anything that clients will have to do. There will be no paperwork or signatures required, just notices that will go out this summer informing everyone of the merger. More information can be found at the website

We are expecting Charles Schwab to be an outstanding custodian, similar to how TD Ameritrade has been. In 2010 when we started our firm we interviewed Charles Schwab to work with them, but TD Ameritrade worked a little harder to earn our business. Thirteen years later and $130 Million in more assets, we are looking forward to the larger Schwab and the greater resources they should have for a firm like ours. 

Clients shouldn’t notice much difference between TD Ameritrade and Charles Schwab. A new logo on the statement, and a different website to check balances, but other than that not much more that would affect the client experience. The bigger difference will be from our perspective as we work with a new back office to manage the day-to-day details of managing assets for clients. 

As always, we appreciate the relationships we have with our clients and encourage you to contact us if you have any questions or there’s anything we can do for you. If we don’t hear from you, we’ll be reaching out to clients again around tax time to check-in.

Thanks for reading,

Tim Porter, CFP®

Waiting for Joy

My son was up the other night worried about getting a shot. Like any 11-year-old kid, it’s an unpleasant experience that he’d rather not deal with. So we talked about the fear of the shot, which my wife thought was the worst part, followed by the reality of the shot, which is uncomfortable but not horrible, followed by the joy of being done, which is clearly the best part.

The explanation worked! He was able to get back to bed. 

The same explanation can be applied to our situation in the financial markets. This year has been marked by fear and anticipation of what will happen to the economy as they raise rates at a historic pace to slow our overheated economy. Starting now, and in 2023, the reality of the rise in rates will play out as the housing market and the stock market react to the changes in the economy. This will be followed by the joy of being done with record inflation, record interest rates increases, and the uncertainty surrounding those.


We’ve spent the entire year hashing and rehashing the reality of what will happen, and the stock market has suffered as a result. Fear is the worst part as people who pretend to be fortune tellers try and predict the future with little accuracy. We’ve been there and done this. We can check fear off the list. 


Now for the reality. The reality is interest rates have climbed dramatically. Residential mortgages are above 6%. The prime rate that banks use to lend money is at 7.5%. Credit cards are charging more. Car loan rates are up. Business loans cost more. The reality of higher rates is settling in.

In Portland, OR housing is down 1% in the last year, but down 12% since May 2022 according to Redfin. November retail sales slowed more than expected last week showing the holiday shopping season getting off to a slow start, private business activity slowed more than forecast, and as we all know, the stock market is down.

The reality is the economy is slowing down and that will cause some discomfort as companies report lower earnings and stocks bounce around as a result. BUT, the slowing is what we need for inflation to come down, and it is FINALLY coming down. December’s reading was 7.1% versus the 9.2% reading in August. This is evidence the Federal Reserve needs to stop raising rates to slow the economy, which is causing the discomfort. 

Like we told Henry, the discomfort is no fun, but it tells us we’re almost at the end of the process and the joy of getting through it is right around the corner. 


In my last letter, I wrote how stocks typically come roaring back as the economy exits a recession. This is what we invest for. The elation that comes from getting through another tough scenario usually carries the economy and the stock market up for several years, which should get us back to the highs of 2021. Then surpass the old peak to new highs. 

As usual, the time frame is unclear as we approach the new year and the new reality of the slower economy ahead. However, this was also true in 2020 as the uncertainty loomed from Covid, in 2008-9 as a financial crisis was slowing things down, and in 2001 during the tech boom and subsequent recession. The same joy that came as we got through those tough times will be the same joy that will come as we get through the challenges of inflation. That should be enough to get us to new highs. So bring on the joy!


To help us participate even more in the joy of the recovery, we still have cash on the sidelines to invest in most accounts. We made some trades in September and invested in CDs in some accounts, but haven’t invested much since then. If there is more volatility in the first part of 2023, we intend to take advantage of that and put the rest of the cash we’ve been holding back to work in companies and funds we think will take advantage of the rebound in the latter half of the year. 


We’ve finished sending the required minimum distributions out for everyone over 72 and are working on “Loss Harvesting” to minimize any taxable gain in accounts. Please let us know if you have any questions about that or anything else. Jeremiah or I will be in the office most days if anyone needs anything.

Finally, years like this always leave a bitter taste in our mouths because we care deeply about our clients and we take pride in helping them avoid bad decisions that cause worry and anxiety. The decision to own stocks this year is not preventing anxiety but causing it, and we are the ones who encouraged it.

This fact is not lost on us. However, you should know we made the decision to own stocks knowing full well this can happen and HAS happened. In fact, the stock market is negative about 27% of the time, and in the last 20 years, has been negative only three years: 2018, 2008, and 2002. 

We had bitter tastes in our mouths during those years but I’ve found in my 17 years of experience, that bitterness doesn’t last forever. There are always sweet days ahead. 

This year more than ever, we thank you for being our client. 

May your Christmas and New Year’s sweeten your year.

Thanks for reading,

Worst Time of the Year

We all know what …the most wonderful tiiiiiime of the year… is. But what’s the worst time of year? Fall. It means to drop suddenly, to descend to a lower place, or… summer’s over. The sun’s leaving and the rain is starting here in Oregon. Time to put everything fun away. Get it all wrapped up or indoors so it doesn’t wash away, freeze, or get ruined over the next 6+ months. Even the name is negative and, coincidentally, it’s what the stock market does in September.

Historically, September is one of the worst months of the year for stocks. So it is once again in 2022. 

So why wouldn’t you sell in August every year? Well, there’s no guarantee it happens every year AND you’d miss out on …the most wonderful tiiiiime of the year! October – January is seasonally the best time of the year for stocks. Often called the Santa Claus rally.

Someone who trades in and out regularly might want to try and exploit these patterns but long-term investors don’t pay much attention. 

Instead, we look to long-term averages. For example, we know during an average recession since WWII the stock market goes down approximately 30%, but they don’t stay down. After a recession, on average the stock market goes up dramatically: 1-year stocks rise 15.33%, 3 years stocks rise 45.84%, and 5 years stocks rise 120.33%. 

So now that stocks are down 23% so far this year, there’s really no reason to fear the pullback anymore, because it already happened. We can now start to look to the up markets that come after a recession and try to capitalize on those.

How do we do that?

1. Sit tight. Let the doom and gloom of fall play out and as we head into the best time of year for the stock market. The money that’s already invested will benefit when inflation moderates and the stock market starts to rise again. No predictions here of how long it will take, but we are confident the deliberate decision to increase rates from the Federal Reserve will help stop prices from accelerating higher. 

2. Invest more. Since we believe we’re most of the way down, now is a good time to take advantage and put some cash to work. We’ve done this many times now: March 2009, July 2011, Jan 2016, June 2016, Feb 2018, April 2020… Without exception, putting money to work in the midst of a downturn has always been a good decision.

Here’s a list of what we’re about to buy in our Growth Stock Portfolio: The bank Wells Fargo WFC, the cyber security company Crowdstrike CRWD, and the auto company Ford F.

In the Moderate Funds Portfolio, we’re making plans to buy a Buffered ETF. These funds seek to minimize the downside and capitalize on the upside over the next year. One fund, in particular, will avoid the first 15% pullback if stocks go down, but will still capture a 15% upside on the S&P 500 if stocks go higher in the next year. 

3. Discuss other options. If you find yourself getting worked up about the volatility, please contact us so we can address those feelings and discuss what changes, if any, we should make to your portfolio in the future. Guarantees are paying above 4%/yr now and while we don’t suggest selling stocks that are down, these could be great for uninvested money or after things trend higher.

We’re printing out our Call List to try and touch base with each client. We look forward to talking then but feel free to contact us if you have any needs prior to that.

Thanks for reading,

High Praise

You know you invested in a good company when even the local weed shop gives them high praise. So it is with one of our latest stock picks in our Growth Stock portfolio this year, Costco. 

Other retailers like Target and Walmart have struggled to keep up with a change in consumer behavior. Consumers are changing from buying TVs and home goods during the pandemic, to buying clothing and things that make them look good as everyone resumes their social lives.

Costco once again proved they’re the best retailer on the planet by anticipating the change and managing their inventory like pros. The stock has reflected that and we’re glad to own it now. 

It’s not just Costco, though. Most stocks (and the stock market in general) are significantly higher than their June 16 low, and our investment accounts are finally heading in the right direction. We gave three reasons for the pullback in a letter on April 22, and those same three reasons are why the market is bouncing:

Gas prices are declining. Not exactly news, we’ve all noticed this the last few months, but oil and gas prices dropping are part of the reason we are seeing some optimism show up in the stock market. People’s wallets won’t be quite as pressed now that gas is below $5 and $6 per gallon.

Inflation peaked…for now. The last inflation report was an 8.5% gain from last year. That was down from 9.1%. So inflation has peaked… unless next month is even higher. One encouraging sign is that commodity prices are coming down like lumber, copper, and oil, which should keep the prices of goods from inflating as much in the future.

Russia/Ukraine news is not front and center. The war in Ukraine is still going on, but it doesn’t dominate news coverage now. This doesn’t mean it can’t get worse. For now, investors seem to be taking it in stride; deciding the world will continue even with this war raging on. 

The change in mood in a relatively short period of time is why we encourage people to stay invested even when the accounts are down. We can never tell when investors, which are emotional beings, will go from feeling like stocks are up-in-smoke one month, to singing their high praise the next. 

It’s easy to get swept up in the emotional roller coaster when articles, like this one, pop up saying the stock market could be 16% higher in a year. But let’s take it all in stride and remember this: if the market continues higher, we will cheer. If stocks resume their decline, we will deploy the cash set aside in the portfolio and see if we can find other Costcos to invest in.

Other News

Stocks rising was not the only good news in July. I became a father for the fourth time July 27th. My son, Charlie Luke Porter, was born two weeks early. He and mom are happy and healthy, and I’m trying to remember how to sleep with a baby on my chest in the living room at night to give mom a break. 

***No babies were harmed in the taking of this picture!

Thanks for reading,

How to Endure This Pullback

There are endless tutorial videos on a number of subjects now. I saw one recently that’s my favorite. “How to Lick a Lollipop.” If you have 1 minute and 6 seconds you must watch it, it’ll change your life. Ok, maybe a slight overstatement.

To be clear my daughter does not have a youtube channel, but her advice is priceless, “ do this…”, and she licks the lollipop. It’s not hard, it’s not complicated, and she gets rewarded. No need for her to learn the molecular makeup of the lollipop, no need for her to do any math… She licks and gets rewarded.

Enduring the pullback in the stock market is similar. You do this… you endure the pullback. It’s not hard, it’s not complicated, you don’t need to know every detail, no need to overcomplicate your life by trying to assess blame for who’s responsible for it… You just endure it, and for the last 100+ years, investors have been rewarded when the stock market inevitably comes back.

Overcomplicating matters by factoring in too much information and making too many decisions… is how NOT to endure a pullback.

Overthinking the political influence on the economy is a common mistake. We often hear of people making a direct connection between the President and the stock market. Some will assign total blame every time it drops and others give all credit when it goes higher.

An example of this was in the 90s. Clinton didn’t deserve all credit for the economic boom when the internet was invented, and today Biden doesn’t deserve total blame for the inflation and subsequent pullback were in. In fact, if the stimulus is largely responsible for the inflation we’re experiencing (which we believe), Trump pushed through more COVID stimulus than Biden did, however, Biden’s round of stimulus came late and seemed the most unnecessary. 

Oil prices, interest rates, the economy, the stock market… who gets credit, and who’s to blame? As a voter, these things do matter and will matter in November, but as a long-term investor, they can be unhelpful to dwell on.

Watch less news, make fewer decisions, and think about the reward that’s coming when inflation abates. That would be Penny’s advice to us.

How can you endure this pullback? Put your phone down. Don’t investigate every day-to-day financial detail. Don’t wade into the endless financial news that can turn even a positive headline into a crisis, but look at the big picture and the likely reward that awaits us on the other side. 


However, if you’re a stickler for details, here’s the plan for the accounts. We used some cash earlier this year to take advantage of this pullback and bought some stocks and funds we believe will go higher in the future. We now find ourselves getting close to making additional buys if the stock market drops even further. 

This is our game plan every time the market drops. Buy some if the market drops; buy more if it drops even further.

The S&P 500 was around 4100 during our last buys and we’d like to wait until it’s down around 3600 to buy again. That would be a 27% drop from the beginning of the year and another 6% drop from where we are now. 

We’ll be adding to stocks we already own like Wells Fargo, Ford, and Amazon, in the Growth Stock portfolio. For our Moderate Funds portfolio, we’ll be rebalancing into more of the S&P index to capitalize on the rebound in stocks that will come when inflation moderates.

Remember, there’s no need to dwell on every detail of the financial markets. If you find yourself struggling to stomach another tough monthly statement, call us, so we can help you see the big picture and point you towards the reward that’s coming.

Thanks for reading,

Positive Predictions

Often times in the news, positive headlines sink to the bottom and the negative headlines float to the top. Such is the case regarding the economy and the stock market currently thanks to another high inflation report last Friday and three straight down days in the stock market.

With that in mind, I thought I’d send out a positive prediction for the second half of 2022 from a well-known bank, JP Morgan Chase. Their Chief Global Strategist, Marko Kolanovic, who successfully predicted the stock market bottom in March of 2020, is predicting markets will rebound to end the year flat. 

The article and details are below, but he’s essentially saying the S&P 500 will rebound and recover the -22% that it’s lost so far this year. 

The strategist believes that investors have been too pessimistic on overblown recession fears, noting that the consumer remains strong on the back of economic reopening.

He says, “The move in market prices is more than enough recession risk, and we believe a near-term recession will ultimately be avoided thanks to consumer strength, COVID reopening/recovery, and policy stimulus in China,” Kolanovic said.

Even more encouraging is that Kolanovic is not alone. Another strategist, Jeremy Siegel, is also optimistic over the next year and believes that investors in stocks today will not be disappointed a year from now.

While there certainly are predictions stating the opposite, it doesn’t benefit us long-term investors to focus on them. In fact, selling out and sitting in cash even for a few “UP” days can be incredibly detrimental to a portfolio. Listen to these statistics over the last 10 years:

  • 8 of the 10 biggest up days happened within 1 month of the biggest down days.
  • If an investor in the stock market missed the biggest 5 days they would have lost 32% of their total return over the last 10 years.

The bottom line is while the market continues to be dramatic and price in the worst-case scenario, it really does pay to sit tight.

Siegel mentions we’ve seen bigger shocks than what we’re seeing today with high inflation, and although we may still see volatility, we’re closer to the bottom than the top at this point.

He’s right, we have seen bigger shocks. One of the bigger shocks I’ve seen was during 2008-9. The wheels were coming off the financial system back then and the fear was a total collapse of the banking system. Today we suffer from concerns stemming from higher prices. Serious enough for a pullback, but not serious enough to ruin your summer.

Thank you for reading! We’re in the office and happy to talk. Please feel free to reach out if we can do anything for you.

Thanks for reading,

Are We There Yet?

The dreaded question of my children during our road trip to Yellowstone last year. Impatient and sick of the road, they’re desperate to get out of their seat. What’s the solution? Snacks, screens, sleep… whatever it takes to keep them in their seat…for 14 hours!

When we’re investing in the stock market, the road can feel long. We get impatient, a little car sick, we want out of our seats because we’re tired of the trip, and we ask, “Are we there yet? Are we at the bottom yet? Will the market rebound now?” 

I’ve been asking these questions this week as the Federal Reserve raised interest rates by 0.50%. The market went straight up, over 3% yesterday because it was relieved they didn’t raise them more. Only to watch the stock market go down a similar amount today because the same issues still persist.

So, are we there yet? Are we at the bottom? Typically, it’s impossible to know when the market has bottomed until we’re months past it. Like picking out a valley when you’re on a peak, it’s easier when you’re out of the woods.

Since we never know exactly when the top or bottom is, we pick levels to sell the gainers on the way up and buy stocks on the way down in our Growth Stock portfolio. We’ve bought several stocks already with the cash we generated from selling. With the market down again last month we bought another. The favorite store for a lot of us, we bought Costco this week.

We believe Costco has one of, if not the most, sticky and loyal customer base. They should be able to pass on higher costs to the consumers (unfortunately) and are due for a membership price hike soon which will help boost the stock. The stock is down greater than 10% from its peak and that was enough for us to jump in.

It’s important to remember we have a 3-5yr time horizon on these stocks and the volatility we’re seeing in the stock market corresponds to short-term fears regarding inflation, war, and China lockdowns. 

Things could improve dramatically if the inflation number comes in LOWER than the 8.2% expected next Wednesday. If it’s HIGHER than that number, the road will get longer, more irritating, and the inevitable rebound will be pushed out.

Regardless if that rebound is next week or next year, the best way to get where we all want to be is to stay in our seats and wait for the news to turn. It’s our job to help you do that. Please call us, email us, or come in to see us, so we can talk you through the road ahead.

Thanks for reading,

 Tim Porter, CFP®

From One High to the Next

We started the year with a new all-time high in the stock market, which we cheered. Since then we’ve gotten new highs in inflation, new highs in gas prices, and now new highs in Russian aggression in Ukraine. We’re not cheering about these new highs, and neither is the stock market.

Stocks hit an all-time high on Jan 3rd followed by more intense volatility than we’ve seen since COVID, and stocks were down approx. -12.4%. However, March brought us back to a much more reasonable level. The S&P 500 is now only down about -6.2% for the year. We feel this is a pretty mild drop given the headlines that go From One High to the Next.

Let’s take them one at a time:

Gas Prices Hit All-Time High

The average price of gas in Oregon is now 4.66/gal according to AAA. This is in direct response to the war in Ukraine and increased demand as the world emerges from a pandemic. Russia supplied 10% of the world’s energy, 7% of our country’s energy, and approximately 35% of Europe’s oil and gas. When we put sanctions in place to hurt Russia for their unprovoked aggression, we will suffer and are suffering from higher gas prices.

This is not catastrophic, though, and these high prices won’t last forever. Demand will reduce as we continue to discover alternatives and supply gets back to a normal level. After a long slump, the stocks of oil companies are going up, but we don’t think this is a long-term trend and haven’t added investments in that area.

Inflation Hits a 40-Year High

Another high we don’t want. The level of inflation reached 8.5% in April, meaning, goods are 8.5% higher than they were 12 months before. This was hoped to have been temporary because of a supply shortage due to pandemic challenges but is proving to be much more persistent. The Federal Reserve has begun the process of raising rates and will do so dramatically this year if inflation does not moderate. Jerome Powell anticipates 7 rate hikes this year and is likely to increase 0.50% in May and maybe June as well. Double the 0.25% rate hikes we usually see. This is strong medicine to cure inflation, but the alternative is worse.

Where does one hideout in times of inflation? Stocks. Companies that can raise prices to offset costs can continue to do well in inflationary environments. Under the mattress is not a good place to put your money, and bonds are even worse.

Russian Aggression Hits All-Time High

Russia is ramping up aggression again and appears to be focused on carving out the eastern and southern parts of Ukraine now. This is, of course, after the spectacular defeat in Kyiv due to broken supply chains, neglected equipment, and panicked Russian soldiers retreating in disarray.

Fortunately for Russia, their unorganized and broken-down military is still being funded by all-time-high oil and gas revenues. Putin, it appears, is better at pumping gas than running a military, or a country.

The late Senator McCain said in a 2014 interview, in reference to the country’s corruption, “… Russia is a gas station masquerading as a country…” 

Unfortunately, that gas station has plenty of fuel to burn down the infrastructure of Ukraine and global growth as well.

Rick Newman from Yahoo Finance says, “The International Monetary Fund estimates that Putin’s barbaric invasion of Ukraine will lower world economic growth 0.8% this year… by about $935 billion…roughly equivalent to zeroing out the entire economy of Turkey or the Netherlands. The toll could easily top $1 trillion if the war drags on or escalates.”

Slower global growth will mean slower growth for stocks. However, if you’ll forgive me for being cold and callus for a moment, war is often good for the economy and stocks. Governments have a blank check during war to spend billions on defending themselves and their allies. Our country is no different. World War II lifted our country out of the Great Depression.

So what do we do?

As always, we suggest staying the course and making no major course corrections. We’ve trimmed some of our tech-focused growth positions and bought one bank, Wells Fargo, to help us weather the higher interest rate storm in our Growth Stock portfolio. We don’t plan to make any wholesale changes to our investing strategy.

The investing strategy, which we believe is appropriate for most retired clients, already anticipates times of growth and challenges. We use a combination of several different types of investments to do this: Guarantees from a bank or insurance company, Growth Stocks to help keep up with inflation, Funds that are inexpensive and help to diversify, and Real Estate to capitalize on growth in residential and/or commercial markets. 

Retiree Portfolio PDF Link

Retiree Portfolio

The bottom line is although stocks may continue to get bounced around, we want to stay invested anticipating the day when the headlines will be about the END of the Russian aggression, the MODERATING of inflation, and the DROP in gas prices.

When we start to see headlines like these, stocks will head toward new highs again, and we will all benefit once again.

Privacy Notice Link

Every year we’re required to send out a copy of our Annual Privacy Notice to all our clients. Please click to see this year’s updated notice.

Thanks for reading,

 Tim Porter, CFP®