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In this Market & Economic Outlook, we have not one but two industry experts joining us, in this Q&A style webinar. We discuss the current economic outlook and answer all your questions, Matt moderates this discussion.

Our guest speakers are Jason Piper of MFS Investments and Joe Macintyre of Hartford Funds. These two industry experts represent two companies you may have heard of before. Hartford Funds & MFS Investments are deeply rooted in economic research and market analysis. They are answering all your questions, sharing timely information & research that we know many of you will be interested to hear about.

All the slides used in this webinar are attached below.

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To kick off the new year we have special guest Justin Sidhu from JP Morgan joining us over zoom on January 25th at 4pm pacific for a Guide to the Markets.

With a year like 2022 behind us, we are already getting many questions about the new year upon us and what we see happening…..good and bad. Our guest speaker represents a company deeply rooted in economic research and market analysis. He will be sharing timely information that we know many will be interested to hear about.

A little bit about our speaker: Justin Sidhu is an executive director and client advisor at J.P. Morgan Asset Management. An employee since 2005, Justin works in the independent broker dealer channel and is responsible for mutual fund and ETF sales growth in the Pacific Northwest. Justin helps bring extensive resources straight to our team to help support all our clients.

Cover slide
The key takeaways from this slide are that regardless of how the market finishes the year, whether positive or negative, the market is down an average of -15% at some point every year. So, when the market is down -15%, investors don’t necessarily have to worry because that is not out of the ordinary. And even though the market is down an average of -15% each year, we can still see that the market has a tendency to recover and give us positive returns 75% of the time with an average rate of return of 8.7% over the last forty-two years.
There are two key concepts depicted on this slide. The first concept is on the left, where we can see that based on our expected return, we can anticipate how long it will take for the market to recover from the negative performance we saw in 2022. Which is why, now is not the time to move to safety, because it is the future growth that portfolios need in order to recover what declined in value during the previous year. On the right, you will see the details of some historical bull markets and their countering bear markets. Each side of the table gives the overall returns and the duration of each event. Considering that no one has a crystal ball or knows precisely when a bull or bear market will start or end, the point we can take away is that it pays to remain invested because the average bull market outperforms the average bear market.
Similar to slide three, which depicts intra-year volatility of the stock market, this slide shows the intra-year volatility of the bond market. Despite average intra-year drops in the bond market, bonds still produced an average annual rate of return of 6.6% over the last forty-seven years and were positive 89% of the time. We can also see how unprecedented of a year 2022 was for the bond market, since it was the first time that bonds were down -17% and finished the year down -13%. While this is a unique time in the market, bonds are typically the less volatile portion of an investment portfolio and considered safer. Because of this, the chart also showcases why, even if we are worried about the market’s volatility, we never want to put all our eggs in one basket and are better served by having a properly diversified portfolio with a mix of bonds and stocks.
This chart shows the Fed’s anticipated interest rate levels. The expectation is for the economy and inflation to continue to slow down now that interests have been increased to current levels. Since we are starting to see inflation numbers come down, the hope is that trend will continue, and we will only see smaller, more spaced-out rate hikes over the next twelve months. Once the Fed sees signs of inflation for goods and wages coming under control, they expect to be able to begin reducing interest rates in early 2024.
Slide seven is referred to as a blanket chart because it looks like a quilt. The important lesson that can be learned from this chart is that a diversified portfolio that includes a mix of all investment types such as bonds and stocks, as well as a diversified mix of investments across stock market sectors and industries is the ideal way to reduce volatility while still achieving a good risk adjusted return.
The final slide is one of the most important slides to take note of because we are all subject to the headlines and the fear mongering on media outlets. Volatility is a reality of investing, and it doesn’t matter whether it’s bonds or stocks, but that volatility diminishes with time and diversification. So even though the markets are down in a twelve-month period, it doesn’t necessarily mean that we need to sell or change investment strategies. In general, without taking a into account your personal risk tolerance, it’s recommended that shorter-term funds that you will need in the next 1-3 years are invested in less volatile investments, while longer term needs can be more aggressively invested, because when the market is broken down into 15 or 20 year time periods going all the way back to 1950, none of those periods have produced a negative return.

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