Obsidian Market Update 1/13/2023
In the prior issue of this newsletter, we provided a snapshot of the performance of the S&P 500 during 2022. This week we focus on the valuable lessons we take into 2023.
- Portfolio diversification is critical.
When rates of inflation and interest rose last year, both the stock and bond markets retreated. Diverse portfolios made up of various classes of stocks, bonds and types of real estate typically performed far better than the 19.4% decline in the S&P 500, 33.1% decline in the Nasdaq and worst-ever year for bonds.
- Fear of Missing Out (FOMO) is not a principle of prudent investing.
In 2020 and 2021, the outstanding performance of tech sector and pandemic-related stocks prompted many formerly disciplined investors to buy—often for fear of missing out. The trifecta of high inflation, rising interest rates and a strong U.S. dollar hit tech companies hard in 2023 and reinforced the long-term value of diversification.
- The Fed has learned from the past.
In the 1970s, then Federal Reserve Open Market Committee Chair Arthur Burns’s failure to respond quickly to inflation by raising the benchmark rate contributed to stagflation.
Taking an immediate and measured approach, current Fed Chair Jerome H. Powell raised the federal funds rate seven times in 2022 in an effort to curb inflation without causing a recession.
Looking ahead to 2023, the Fed “anticipates that ongoing increases in the target range will be appropriate” to reach its two objectives: 1) maximum employment, and 2) inflation at the rate of 2 percent over time. We’re rooting for the Fed’s success.
- Inflation: The worst could be behind us.
For the 12 months ended June 2022 the U.S. Bureau of Labor Statistics reported that the 9.1 percent increase in the Consumer Price Index for All Urban Consumers was the largest in 40 years.
While far from unanimous, analysts suggest that improvements to supply chains, lower rents and energy prices may translate into a slower rate of inflation in 2023. We will keep our eye on the labor market and related pressure on wages.
- This too shall pass.
History tells us that nothing—not even a bear market—lasts forever. The duration of a bear market (a prolonged downturn of at least 20% in prices) depends on if it is accompanied by a recession. Whether we’ll experience a recession in 2023 is an open question.
Historically, returns recover quickly following bear markets, Check out the following chart from LPL Research.
How Much Protein is Just Right?
In the story of The Three Bears, Goldilocks chose among only three options to find the porridge, chair and bed that were just right. In balancing our diets, however, we’ve got thousands of options when we’re seeking the just-right amounts of fat, carbohydrates, minerals, vitamins, and protein.
Today, let’s look only at the protein our bodies need to stay healthy.
For adults, the U.S. Food and Drug Administration recommends 50 grams of protein per day. Many nutritionists, however, suggest a range based on age, sex, health, and activity level to determine how much protein is just right.
Nutritionists at Mayo Clinic recommend the following grams of protein per day for 150-pound (68-kilogram) active and non-active adults:
- Not active: 0.8g or 54.4 grams per day
- Very active: 1.2g to 2g or 82 to 136 grams per day
Johns Hopkins University School of Medicine provides a handy list of the protein content of common foods to help us figure out which foods provide the just-right amount of protein.
How We Help
What’s the just-right place for you in retirement?
As we near retirement, it’s natural to think about where we’ll live. Should we “age in place” hiring help as we need it? Should we move closer to our children or stay near friends? Do we want to live in a warm climate or near a major airport so we can travel when the weather gets cold? Is a continuing care retirement center better than a retirement center that does not offer continuing care?
Honestly, we don’t know the right answer for you. We do know how to help you make what is both a lifestyle and financial decision. For example, a move to a warmer climate could be far from children but bring more favorable income and estate taxes. Would the “snowbird lifestyle” makes sense instead? Aging in place could be an option if you move to a less spacious one-story home, but would you be comfortable in a smaller space?
Let us help you determine the just-right place for you to enjoy your retirement.