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July 1, 2022

by | Jul 1, 2022 | Quarterly Letters

Dear Client: Returns for the major stock indices and the current bond and money market yields are as follows: IndexYTD 2022Dow Jones Industrial Average   -15.30%S&P 500   -20.57% Fixed Income Yields        1 year5 year10 year30 yearMunicipals1.64%2.27%2.75%3.25%US Treasuries2.73%3.03%3.00%3.16% Fidelity Government Cash Reserves Money Market Fund1.05% The first half of 2022 has undoubtedly been off to a rough start.  The 20%+ decline in the equity markets from their January 3rd highs has landed us in a bear market.  There has been nearly nowhere to hide as the bond market is also suffering its largest percentage decline ever (-10%) to begin a year.  Every notable equity index is down by double-digit percentages, and each market sector except energy is down for the year.  The value stock indices have significantly outperformed the growth indices in relative performance but are also still down for the year.  The markets have declined by 20% or more 26 times since 1929, three of which have happened in the last five years: the 4th quarter of 2018, the COVID decline of March 2020, and now the first half of 2022.  Though we know the market has recovered after every prior bear market, the patience, fortitude, and values of long-term investors are again being tested. The U.S. is likely in a recession as measured by the National Bureau of Economic Research’s definition: “a significant decline in economic activity lasting more than a few months.”  However, the more commonly referenced definition and harsher standard of two successive quarters of negative real GDP decline is still undetermined.  This is perhaps the most unusual recession of our lifetimes, with more than full employment...