Alone With My Thoughts

During a recent interview, growth stock investor Cathie Wood remarked that “innovation solves problems”. That is one of the beauties of investing, entire industries seemingly come out of thin air when the times get tough. Most recently, the pandemic brought us Zoom Video which is now a $22 billion dollar household name. Think of Moderna, another pandemic problem solver. And as we come out of an unprecedented economic shutdown that inadvertently is causing a major shortage of workers, witness the lowest unemployment since 1969, Amazon is adding about 1000 robotic “workers” per day. “That means Amazon could have more robots than employees by the year 2030” continued Wood. Innovation and savings are the keys to economic growth and its hard to bet against the ingenuity that is here at home and around the world.

It has been a good month for Philadelphia…Not only are the Eagles vying to be in the NFC championship game but the Philadelphia Exchange indices are leading the way in the market. Look at the PHLX Gold/Silver index up 12% year to date, PHLX Semiconductor index up 10%, and the PHLX KBW Bank index up 6%. A late day rally on Friday has helped give stocks a nice run to start the year and three positive weeks for the Nasdaq.

To quote two of our most famous traders from the Philly exchange (by way of the movie, Trading Places) Louis Winthorpe III “Looking good, Billy Ray.”  Billy Ray Valentine “Feeling good, Louis.”

Data as of the close of business 1/20/23.

With stocks and fixed income both in the red this year, we continue to remind people that “there is always a bull market somewhere”, making the case for a diversified portfolio.  2022 to date has certainly tested the resolve of investors, the classic 60-40 stocks to bonds allocation model is suffering its worst performance since the Great Depression, currently down about 18%.  We have had some re-assuring good news in several stocks that many of our clients own (full disclosure).  For example, a huge spike in energy costs has lifted Chevron up 56% year to date.  In the arena of health and bio-tech, Regeneron just recently had the first FDA approval for an eczema treatment (Dupixent)for adults.  The stock is up 17%  this year.  With the attention and funding going into infrastructure projects, combined with high crop prices, John Deere has managed a 15% increase this year.  Finally, as the Fed combats inflation with higher interest rates, regional bank NBT is up close to 24%.  The point is, stocks move with the market in both bull and bear markets, but having a diversified portfolio with investments that don’t always correlate with these moves can help mitigate the risks.

Performance data as of 11/4/2022. Past Performance is no guarantee of future results.

The definition of a bear market is pretty straight forward…a 20% drop over 2+ months from previous highs. That is what we are in and there have been only 3 bear occurrences since 2000, with one of them lasting just 33 days (2020). (Technically, the Nasdaq market has now entered bull market territory, having rebounded 20% higher than its recent low). The idea of being in a recession appears to come with a bit more debate…is it two consecutive quarters of negative GDP growth, or a combination of negative growth, high inflation, and an increase in unemployment. While we wait for the bureaucrats to argue the definition, let’s consider two things, one, once they label a recession, we are probably on our way out of it, and two, recessions should be viewed with respect to their level of magnitude. With a strong jobs report and now a cooling of inflation from recent highs, the economy appears to be hanging in there. If the recession remains mild, and inflation tempers, that could be the definition of a recovering stock market.