The third quarter ended poorly last week in what has been a very frustrating year for markets thus far. It begins to feel like it will never end. We are in a horrible cycle in which the Federal Reserve, and many in the markets, seemingly want a more severe recession. Every time corporate earnings or economic data suggest things are not as bad as they want it to be, they punish stocks. It seems like we are in a never-ending downward spiral.
It always seems that way right about when the market finally hits bottom and starts climbing. It is impossible to call such things, but this is feeling like a bottom. I would be very surprised if we do not rally from here – that may even be happening this week. The question will then be: Is this another bear market rally or is this one for real? Time will tell.
Meanwhile, times like this remind us to focus on the fundamentals. Prudent investing is done from the bottom-up, and the companies we own – both directly and indirectly through funds – are high-quality companies. I couldn’t be writing this without products from Microsoft. Apple keeps me connected when I’m away from the office. Most of us are still putting gas in our cars, and we all need food on the table.
Market and economic cycles are part of life. This too shall pass, and we will be glad that we were able to buy these companies at these prices. It may not seem like that now, but it is always darkest before the dawn.
Right now, our thoughts and prayers are with those who were impacted by Hurricane Ian. I was in St Simons Island, GA, the weekend before Ian, and was reminded that it is always beautiful right before the storm comes. When the storm leaves, there is damage to be handled, but it is almost eerie how beautiful the weather gets.
Whether in real life or in our financial lives, storms can be unnerving, but they do pass. Right now may seem bleak, but it is time to stay the course. Dawn will come.
Chuck Osborne, CFA
Authored 10 a.m. Monday, October 3, 2022