A Look at 2022 Markets
At Bassett, Dawson & Foy, the financial planning process begins with identifying and prioritizing your specific financial objectives. Together, we determine short- and long-term strategies that we think have the best potential for achieving your objectives. We can then either assist in the implementation of your plan or coordinate our efforts with other professionals of your choice. In either case, we monitor the progress you are making and review and revise our recommended actions when needed to provide you with a dynamic, up-to-date, and comprehensive plan that is designed to meet your unique needs. Last year, 2021, we finished our best year ever on record as assets under management passed half a billion for the first time ever ($513.6 million as of 12/31/21).
As we continue to monitor the markets and navigate the testy waters we have experienced through the first months of 2022; here is our outlook for the remainder of the year.
- Geopolitical Sell-off will be short lived: Given the initial market action, the U.S. Federal Reserve (and central banks globally) remain a bigger focus for most U.S. investors, and Russia is an aggravating factor to slowing global growth, higher than-desired inflation, and tightening monetary policy. Commodities generally could be a good hedge, along with exposure to energy or materials in portfolios also could act as a hedge. Looking at historical incidents; Cuban Missile Crisis, Iraq War, the 2014 Ukraine conflict and most recently the Brexit vote; markets tend to bounce back. To the tune of an average total return of 5% in the first 6 months following each conflict and 9% total return 12 months after the initial event.
- Value stocks: which had trailed growth stocks 9 of the previous 11 years, will continue to show leadership. This does not mean growth stocks will necessarily do poorly, but value stocks and sectors are long overdue to catch-up some of the disparity in performance from the past decade.
- Large cap stocks vs. Small cap stock (S&P 500 vs Russell 2000): these outperformance cycles run around 7 years on average. Following a 9-year run from April of 2011 through August of 2020, large cap stocks had outperformed small caps by a total cumulative return of 221% to 111%. Since September of 2020, small caps have outperformed large caps by 15% over the past 14 months. We expect this reversal will continue and small caps will outperform over the next 5 years or more.
- It will be important to continue to add to “outside the box” or alternative investments to reduce the risk you have by staying in the same stocks that have done well up to this point. We continue to look at investments such as global infrastructure, MLP energy, alternative energy, water, commodities, and/or REIT investments. Intending to offer good yields and inflation protection.
- For the next couple/few years, while the Fed is raising rates, (the first of which occurred for the first time Wednesday the 16th of March for the first time since 2018) and until yields on bonds are higher, we will continue to utilize invest investments such as “non-traditional” bond funds, floating rate funds, and other multi-sector bond funds looking for slightly better returns than traditional high-quality investment grade bond funds.
- A shift in performance: We suspect we may see a greater breadth of stocks aiding future increases in the market. While the few that have led over the past decade, may underperform in the longer-term. If correct, we would likely see active managers reverse the trend of underperforming cheap passive investments.
At Bassett, Dawson & Foy, it is important to us that our clients are comfortable with each step of establishing their goals and implementing their financial plans. With this in mind, we have built our company with a philosophy of old-fashioned service and satisfaction, striving to provide our clients with the highest level of service possible.
Bassett, Dawson & Foy Inc. E.A. Delle Donne Corporate Center // 1011 Centre Rd., Suite 110 // Wilmington, DE 19805 // 302-999-9330 or Toll-free 888-811-4223