It’s been a tough start to the year for investors. There’s no way to sugarcoat it; This was a brutal week on Wall Street. The S&P 500 has declined 7% in January. This has been the worst start to a year since 2016 when the Stock Market declined 9% at one point. That said, a reversal off the lows erased some of those losses, bringing January 2016 down 5% for the month. Things are very oversold at the moment.
The path of least resistance has clearly been to the downside in 2022, a complete reversal from the year prior. The velocity and magnitude of the Treasury yield spike has been the biggest driver. It has taken a whole lot of air out of inflated asset prices. Bubbles have popped.
The Fed has been talking hawkishly, trying to let its words do the work. The central bank holds a meeting next week to update the collective thinking. Inflation and Omicron have clearly weighed heavily on the US Economy. A rate hike is not expected to occur next week. But the Market has already priced in 4+ for the year, starting in March. We still think that’s unlikely. The Yield Curve is actually flattening again, a sign of caution. The Market is saying the Fed is about to make a mistake. We will see next week if the Fed is listening.
We held our 2022 Outlook event this week. Mike Harris, our Chief Investment Officer, and I discussed the many issues influencing this Market and mapped out our action plan, virtually. We anticipated a choppy year ahead. It has certainly lived up to those expectations. We have already moved on our plans which I outlined in our 2022 Outlook Newsletter the first week of January.
Defense is our action plan for the first half of the year. We are focused on cheaper, more predictable areas in the Market for now. We plan to be more aggressive around Summer into Fall, when we believe better opportunities will present themselves.
We recorded the event, for your review at your convenience. We hope you find it insightful and interesting.
2022 Market Outlook Event
Here is an index of main points with their start times:
0:00:00 – Welcome and Introduction of Staff (6 mins 15 secs)
0:06:15 – Bedell Frazier Year in Review (6 mins 51 secs)
0:13:06 – 2022 Market Outlook (58 mins 17 secs)
1:11:23 – Q&A (8 mins 9 secs)
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
