Clarity Capital Management Notables - July 20th 2022
Quarterly Market Review
CLARITY CAPITAL MANAGEMENT NOTABLES AUDIO VERSION
Okay…last month we discussed a whole bunch of ways we could think about investing and the market that were steps to take during a market downturn. We promised not to just provide a market overview and give the traditional advice to why it’s important to stay diversified, stay invested, and think about the long-term.
With the quarter just starting out, we thought we would do everything we promised not to do last month! Let’s get into the weeds on what is going on in the markets and how we are thinking about the moment.
Year to Date Market Update and Second Quarter Results:
Global equity markets had an awful second quarter and when the final Wall Street bell rang on June 30th, all major global equity markets were in the red, leading to overall market declines not seen in decades. To underscore how bad it has been so far in 2022, consider that the S&P 500 recorded its worst first six months in 52 years and the DJIA recorded its worst first six months since 1962. For the quarter, the S&P 500 lost 16.1%. For the year, it was down 20.0%.
The themes that drove market performance in the second quarter were the same worries that drove markets in the first quarter, and towards the end of last year. The two most dominant themes continue to be inflation and the Fed – with the former rising to 40-year highs and the latter causing Wall Street to worry that the course of rising rates would lead to a recession.
The other themes were plummeting consumer confidence, rising food and gas prices, negative GDP numbers, declining manufacturing, a cooling-off of the housing market, not-so wonderful corporate earnings, continued supply-chain bottlenecks, and a lot of social unrest here at home. Clearly, we have had a lot going on this year.
When markets are down, it’s easy to want to pull out all together and move into cash. It’s important to remember that we are always planning for times like this. They are normal and can’t be avoided. We are long-term investors and know that it’s the 'time in the market' that usually matters and not 'timing' the market.
You can see this illustration below that if we sat out of the market during some of the best days from 2002 to 2021, our performance would be significantly lower than if we had stayed in. While looking only at the S&P 500, if we were not invested for the 10 best days in this time period, our annual performance would decrease from 9.5% to 5.3%...an annual reduction of 4.2%! This illustrates the importance of not trying to time the market.
Successful investing is a marathon, not a sprint, and even temporary bouts of volatility like we have experienced over the past six months are unlikely to alter a diversified approach set up to meet our long-term investment goals. Therefore, it’s critical for most of us to stay invested, remain patient, and stick to the plan.
Rest assured that we will remain dedicated to helping you successfully navigate this market environment. Please do not hesitate to contact us with any questions, comments, or to schedule some time with us.