2022 May  

First and foremost, remember we actively manage our clients' money at TruNorth. We have no control of markets, and never pretend to have a crystal ball, however we have experience in both up and down markets and are using that experience to make the ride less bumpy for you in every way we can.

What we have been up to

• Over the past few months, we have migrated more towards large dividend paying stocks while keeping large growth in the portfolios.
• We are not single focused only on large caps and keep portfolios diversified and balanced, to meet individual time horizon, liquidity needs and risk tolerance.
• For all of our clients, fixed income is short to protect from rising rates and has been for a long time.
• Cash equivalents gives us dry powder for those buying opportunities.
• We have harvested losses in taxable accounts as appropriate.

The news of the day

The Federal Reserve boosted its federal funds target rate by 50 basis points on May 4th.

This is not a surprise, we the people and markets have been waiting and expecting this to happen. Based on year-to-date performance figures, the poor performance in the stock and bond markets indicates that markets have already priced in this rate hike, and perhaps others.

Remember: Fear and Greed drives markets

It is normal to feel unsettled during turbulent times. It is during times of market unrest that you need to stay the course and trust the advice of your experienced advisor. While stocks and bonds have been hit hard so far in 2022, following the heard is never a good idea. If everyone else is buying or selling now, history tells us you have probably missed the boat. Remember the admonition from your mom “If all your friends are jumping off a cliff does that mean you should too?”

Click the link below to further understand our thoughts on investing:

What Makes Us Different

The Stock Market

• The S&P 500 Index (index) closed April 29^th, 2022, at 4,131.93. This is -13.86% below its all-time closing high of 4,796.56 on January 3, 2022
• The S&P MidCap 400 down -14.10%
• S&P SmallCap 600 down -17.14%,

These three major stock indices are in correction territory. A correction is usually defined as a 10.00% to 19.99% decline in the price of a security or index from its most recent peak.

Stay calm and carry on--Keep in mind, prior to 2020, there were 26 market corrections since World War II, as measured by the S&P 500 Index, with an average decline of -13.7%, according to Goldman Sachs and CNBC. The average recovery period was approximately four months. In April 2022, the S&P 500 Index posted a total return of -8.72%. The potential silver lining in the current climate is that many of our largest corporations are holding a lot of cash. We have always been strong believers in owning individual stocks in large strong companies in our portfolios. That is a lot of dry powder that could potentially reward shareholders with stock buybacks and dividend payouts moving forward.

The Bond Market 

The yield on the benchmark 10-year Treasury note (T-note) closed trading on 4/29/22 at 2.94%, up 60 basis points (bps) from its 2.34% close on 3/31/22, In fact, global bonds just posted one of their worst months ever, due largely to rising interest rates and bond yields, The Bloomberg Global-Aggregate Total Return Index of investment-grade debt declined -5.48% on a total return basis in April, one of the largest monthly declines since the index's inception in 1990.

Despite inflicting some significant short-term pain on fixed- income investors, the normalization of interest rates and bond yields are a long-term positive, especially when you factor in the damage high inflation can cause.

Up next

The Fed has a lot of work to do. We believe that it is behind the curve with respect to mitigating inflation. The war between Russia and Ukraine is making the Fed’s job even tougher, particularly in the areas of food and energy. Rising costs and potential shortages are only adding to the economic fallout from existing global supply-chain bottlenecks. These bottlenecks could become even bigger if the COVID-19 outbreak in China grows. Robust inflation is now a daily headwind for the average citizen.

^{This Market View was published May 2022.}