The seas have been rough. There has been very little joy, either in the equity or in the bond markets. According to Bloomberg data, for the last three months, the DJIA is -8.58%, the S&P 500 is off –10.14% and the Nasdaq is down -11.69%.
The only strategy that has been working, during this time period, is an income one, in my opinion, where the income is greater than the losses. There are some exceptions, as always, in plays for appreciation, but they have been few and far between.
“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”
-Charles Dickens
According to the Dow Jones Market Data, on Friday, the Nasdaq closed below its 200-day moving average and, for the second consecutive day, it met resistance at that line.
The S&P 500 and Dow fell deeper below their 200-day lines. The S&P 500 and Nasdaq are on pace for their worst Octobers since 2018. Both are down more than 4% for the month. The Dow is on track for its worst October since 2020, down more than 3% for the month so far.
“It’s how you deal with failure that determines how you achieve success.”
-David Feherty
The bond markets have not been any saving grace either. According to Bloomberg data, for the last three months, Treasuries were off -5.85%, IG Corporates were down -4.66%, High Yield was off -2.15% and Municipals were down -5.19%.
So, in fact, both equities and bonds are headed in the wrong direction which is causing angst for both institutional money managers and people, alike. While the Fed keeps up with its battle with inflation, they are also causing a substantial rise in borrowing costs.
This is not just a secular issue, but money borrowed for anything and everything including mortgages, commercial real estate, mergers, acquisitions, stock buybacks, and in some areas that cost of borrowing is staggering, as I point to the 28.17% average cost of borrowing money on a credit card, according to Forbes.
In fact, American cardholders paid a record $130 billion in interest and fees in 2022, according to a new government report. The study released last Tuesday by the Consumer Financial Protection Bureau (CFPB) was part of the government watchdog’s biennial report to Congress.
The breakdown was that credit card companies charged consumers more than $105 billion in interest and some $25 billion in fees last year. Overall, it was the “highest amount” recorded in the CFPB’s data history.
“A nickel ain’t worth a dime anymore.”
-Yogi Berra
Then there are the geopolitical dilemmas. What might happen in Israel, or the Ukraine, is certainly on the minds of almost everyone involved in the markets.
If either of these two conflicts widens, or runs amuck, it will not just be a flickering in the wind but a storm of serious proportions. The words, “battered, bashed and bruised” come quickly to mind, if these conflicts continue to widen.
Achieving income, beyond the liquidating losses, is the strategy that I still like the best though I fully admit to exercising a good deal of caution when making any investment decisions these days. Some liquidity is fine, though the yields found in many short-term instruments will not get the job done either.
“Buy when everyone else is selling and hold until everyone else is buying. That’s not just a catchy slogan. It’s the very essence of successful investing.”
-J. Paul Getty
I take his advice at his word!
Original Source: Author
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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