There is no doubt that 2022 has been a challenging year for households. High food and gas prices continue to stretch budgets, while higher interest rates have increased borrowing costs. As the third quarter ends, these challenges persist. Q322 saw stock and bond prices fall in tandem, marking the third consecutive quarterly decline for both.
Looking forward, we anticipate the Federal Reserve to continue increasing rates at the November and December meetings. A portion of these increases is anticipated and may priced into markets. However, this will likely create further difficulties. Throughout this year, we have moved equity and bond exposure to more resilient positioning in light of this.
Even in difficult times, we strive to find the silver lining. U.S. Treasury yields have moved up dramatically this year. For many years conservative investors had very few options. CD and Treasury Yields are now in the 4% range, making these instruments quite attractive.
There may be clearer skies for equities in the future as well. History shows that typically after such a tough year, the following months bring upside relief. Therefore, we do not feel it prudent to abandon equities. We have reduced exposure to areas and are emphasizing areas we believe will do better in an inflationary and slower growth environment.
We recognize how difficult it is to stay engaged during these episodes of market volatility. While this year’s rate increases and market volatility have served as a headwind for investors, there are signs that the worst impact of rising rates may be behind us.
During this challenging time, we cannot predict, but we can plan. Please do not hesitate to contact our office if you have questions or would like to check in. We are happy to walk you through our approach and explain what we are doing to keep you on track to meet your financial goals and needs.
We look forward to hearing from you and hope you have a wonderful week.
Charles D. Dodds, Jr., CFP®, CLU®, ChFC®, CIMA®
President, Sr. Portfolio Manager
Adrian F. Dodds, CFP®
Managing Partner, Sr. Financial Advisor