The Prudent Retiree - December 15, 2022

The first time I heard this song was the spring of 1974. It was in the Phi Mu Delta Fraternity House and I was with Opie, Skeets and the Ghoul. We were sophomores and it was an eventful year. Watergate brought down President Nixon and the Vietnam War was coming to an end. I was also learning about the markets, inflation, banking and the business cycle in my Economics classes. There was a bear market crash that year. A six pack of beer cost 99 cents. Who knew that almost fifty years later those classes and Aerosmith would help us understand the current situation in the stock and bond markets?

Yesterday, the Fed announced their latest decisions and raised interest rates 50 basis points. Chairman Powell announced that inflation has remained stubbornly high and the Fed remains committed to bringing it down to their 2% target. They will continue to tighten even if that causes pain for the economy, workers and the markets. The market was up and then sold off. Volatility. The same old story, same old song and dance. This action by the Fed and reaction by the market is what we’ve experienced all year.

The reasons haven’t changed – supply demand imbalance because of Covid and the war in Ukraine, an abundance of government stimulus and politicians who agree on little except their own pay and generous retirement plans. Chairman Powell did say there were some signs of moderation, but emphasized it’s too soon to change course. He also indicated rates will continue to move higher. Everything points to a recession except the labor market. We seem to have a structural shortage of labor which should keep unemployment low. Let’s hope the supply chain continues on the path back to normal.

For Prudent Retiree, it’s also the same old story, same old song and dance. Our qualified portfolio allocation remains 50% stocks, 50% out of the market. We can make a case that a bottom is near and also argue for another significant move lower. Hedging our position is the prudent course. This has been a poor year for stocks and we’ve fortunately fared much better than the market. Risk management reduced our equity exposure early on. We will have the opportunity to put these funds back into the market when prices are lower.

As the year comes to an end, it is good to reflect. 2019, 2020, and 2021 were terrific years for stocks. 2022 has been down, but that is to be expected in a market cycle. Prudent Retiree’s risk management has put us in a better position than the general market. There was nowhere to run this year except cash. We don’t know what next year will bring, but we will continue to use a disciplined approach to avoid large losses. That truly is the key to retirement and investment success. Aerosmith can Dream On, but Prudent Retiree will work to preserve your portfolios so you can benefit when the markets recover.

All of us here want to thank you for your continued trust and confidence. Best wishes and enjoy happy holidays. Merry Christmas, Happy Hanukkah and Kwanzaa Wishes. See you next year.

Here at Horseman Group, we strive to provide you with the highest possible level of customer service. Feel free to reach us at 314.692.7842 with any questions regarding your investments, risk management, or retirement. Should you wish to be removed from this mailing list for any reason, please respond to this email with your request, and your name will be removed immediately.

Horseman Group – 3 CityPlace Drive - Suite 290 – St. Louis, MO 63141 – 314.692.7842 – www.horsemangroup.com

Advisory Services offered through Horseman Group. Securities offered through AW Securities, a registered Broker/Dealer, member FINRA/SIPC.