Bad news: It has been 50 years since we experienced an ugly Humpty Dumpty market fall like this. All the king's horses and all the king's men couldn't put Humpty together again. As a fundamentalist, there was nothing I could do as I watched great company after great company get their market values Humpty-Dumptyed. 

Where are we now?

Good News: History informs us that we will like the market a year from now much better. It is tough to stay in the market and watch our previous gains be wiped out, watch new moves get slammed. It seems better to sell, as there appears no end to the losses; BUT we know that is self-defeating. We know we MUST STAY INVESTED and accept extraordinary 50-year-level short-term losses in order to enjoy significant long-term gains. You cannot have one without the other. There is no way we will know the point to get out and the point to get in.

Where do we go from here?

Six Million Ways to Die—Choose One: Business leaders, bankers, and even the Federal Reserve Bank are all uncertain of which indicators to watch: Is inflation going to continue to rage? This requires certain types of economic instruments, a particular Federal Reserve Bank mindset, and rhetoric. Or is the economy now headed into a recession? The tools to address a recession are different from those for inflation. They have to turn from the aggressive rate increase regime to cutting rates again and accommodative rhetoric. The economy shows indications of both inflation and recession. The situation is very tricky for us as investors—both yours truly and the Federal Reserve know reflexively what to do in a recession from experience over the last 50 years. It is inflation that is bedeviling everyone. The one thing I know I should not do is leave the market and then think I will somehow come in at a better time in the future.

There is a condition economists refer to as stagflation—when we have both recession and inflation simultaneously; let me leave that alone. I hope we don't get to that.

On fixed income and alternatives:

The Federal Reserve Bank admitted it made a mistake regarding inflation—inflation was not transitory:  it is enduring. The Fed knows instinctively what to do in a recession. They have had 50 years of practice; they keep cutting rates and shoving money to the BIG money center banks, and the government cuts taxes to get money flowing. Yours truly invests in growth stocks, new ideas, and voila market-beating results. However, everyone is out of practice when it comes to how to tame inflation. For now, the Federal Reserve simply needs to keep raising rates until inflation is defeated.

On Alternatives: 

As I write right now, BITCOIN is a bit below $20,000. A $9 billion crypto fund just went bankrupt, and they cannot find the founder. I am not ready to be a grave dancer and think it is over for crypto; the true believers shall rise again.

In conclusion:

Humpty Dumpty did not just sit on a wall and fall. I am reliably informed that he was pushed! In all seriousness, this year has been horrible thus far. The positive news is the last time the market had a bad first half like this, it turned out to be a great year in the end. So, I look forward to an encore performance. The one thing I will repeat is—time to hold on tight to your dreams, do not let anyone steal them. The downturn in the market has already happened, and the only way now is up. It is just a matter of time. I don't know when, but I am confident it will happen. Thank you for your patience and trust.

Sincerely,

Femi T. Shote, MSF, ChFC, CFP®

Accredited Investment Fiduciary®