We pretty much ended up where we started this month, but that masks the tumults that we endured getting there. Despite the S&P being down only 14% for the year to date, we were actually quite a bit lower -- in "bear market" territory mid-month -- only to be rescued by a bear market rally the last week.
And then today we have Jamie Dimon, who I'd not call an alarmist, saying we should prepare for an "economic hurricane" due to quantitative tightening and the Ukraine war. That's a seismic shift in the way he'd been talking previously.
Hard to argue with his outlook, however, particularly the war since we don't truly know its duration and actual impact (beyond what we've already seen). Indeed, Dimnon now thinks oil could reach as high as $175 a barrel. It's hard to wrap your head around what $175 a barrel would do to consumer prices for everything which, in turn, will put additional pressure on the Fed to tighten even further ... and, if that was not complicated enough, add various counterweights that get thrown in without our even knowing much about them (such as the obvious shift in producing more unleaded gas resulting in less diesel, causing diesel prices to skyrocket), and it becomes as clear as mud.
So these are obviously hard times to confidently navigate. In my brokerage account, I'm currently 85% invested in diverse equities (leaning towards value by a 2:1 ratio) and also sitting on $3.5 million in cash. Bonds seem tempting, with the 10-year niggling around 3%, but you'd have to believe that the Fed will not be able to raise rates much more for them to be a hold. Stocks also may seem tempting at times, but it would be easy to make the case that they are overvalued on a going-forward basis and that there could be another significant drop before we hit "the" bottom which, in a bear market, is typically between 30% and 40% off the highs. So, if that holds, we're not yet even halfway there.
So, for now, cash seems like the "least bad option" for the remaining 15% of my portfolio and for the rest I'll ride out the storm. All things considered, I'm grateful to only be down 7.7% for the year. |