Dear Valued Client,
Happy New Year! I hope that everyone was able to spend some quality time with the people that matter most this past holiday season. Before I get into the summary of last year, I want to share a quick story.
“Is everyone freaking out?”
In the past month I met many people for the first time, from making new friends at holiday parties to brief five-minute conversations on a ski lift. When I shared what I do for a living, almost without fail, I was asked something along the lines of “Are your clients all freaking out about the market?” My response was a simple “no” to the bewilderment of the person I was speaking with.
Those experiences reminded me that most investors, and their advisors, are just flying by the seat of their pants. Even today, it amazes me how many of my colleagues still use a soup-du-jour investment strategy. Unfortunately, this lack of a proper, all-weather investment process causes significant fear, anxiety, and mistrust among investors.
I bring this up because I am confident that someone you know is worried about their finances. Here at Navigoe, we want to grow the number of clients we serve. You can help both your friends and Navigoe by introducing us. We will meet with your friends, listen to their concerns, share some of what Navigoes does, and most importantly, complete a complimentary draft plan of their current financial situation.
Even if they do not become clients of Navigoe, the draft plan will go a long way toward helping your friends and family gain clarity around their financial situation and provide them with the next steps to put their investments back on track.
We always appreciate introductions to new prospective clients, so thank you in advance. Your friends will thank you too.
History Doesn’t Repeat, But it Does Rhyme
Thinking about the stock market’s performance these past few years reminds me of the turn of the century. The run-up to 2000 was dominated by high-flying internet and biotechnology stocks. Then came the dot-com crash, when the S&P 500 lost half its value and the first decade of the millennium saw the index still negative after ten years. I have heard that rhyme many times. The “new” technology of the time has near record-setting returns for years, only to be brought back to earth by some event.
Also, in the stanza of that rhyme, globally diversified portfolios trail in performance compared to the hype of the nightly news. Still, they fare better in the subsequent market crash and recovery.
Value Shines in a Disappointing Year for Stocks
Take a moment and review the 2022 Market in Review from Dimensional Fund Advisors. Keep in mind that past performance is no guarantee of future results. Looking at the typical indexes, 2022 was pretty nasty. Even the bond market was not the safe haven we typically expect. It’s no wonder that everyone I met assumed that our clients must be freaking out.
Those are difficult losses to swallow, with bonds down between 9% to 13% and stocks down 15% to 20%. When looking at the Information Technology, Consumer Discretionary, and Communications Services sectors, returns were down 30% to 35%. These sectors contain many high-flying, “must own,” overly touted companies. It would not surprise me if many individual investors’ portfolios are down more than 30% for 2022.
Academically Sound and Market Tested. Again.
How did your Navigoe-managed portfolio do? Most of our clients lost only 8% to 12% in 2022. Why so good, on a relative basis? We have followed the top academics’ portfolio strategies for over 25 years, many of whom have been awarded Nobel Prizes in Economics. A summary of your portfolio is enclosed.
When I started in the industry in the early 1990s, many of these concepts represented the best thinking and research on how to build and manage long-term investment portfolios. Having managed clients’ portfolios through some of the biggest market crashes since the Great Depression, I like to say that the strategies have now been market tested.
The bottom line is that while we can never predict what will happen in the markets, we have a strategy, regardless of the rhyme.
Looking Ahead to 2023
I won’t even guess what the stock market will do in 2023. That said, I would be surprised if the US, and much of the world, avoided a recession this year. But the economy is not the market, and the market is not the economy. That concept is hard to remember when the nightly news likes to wrap up the day’s market movement with a 15-second sound bite tied to a current event. It is never that simple.
Up, down or sideways. It does not matter. We have a strategy and will execute on your behalf.
Every member of the Navigoe Crew takes the trust you place in us very seriously, and we are thankful for being able to serve such fantastic clients like you. Looking forward to seeing you in 2023.
Happy New Year!
Scott and the entire Navigoe Crew