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Vizionary Quarterly Update: 2021 Q4

Welcome to 2022 With All Its Possibilities!

As we turn the page into a new year, I need to warn you that I am going to “geek out” a bit in this letter. I anticipate sharing a bit more depth on the economic realities we are facing as we transition into 2022.

In the 3rd Quarter of 2021, for most of our clients, we took some equity exposure off the table anticipating greater stock market fluctuation in Q4. We got it. Both up and down - we had some pretty volatile days and weeks in Q4 of 2021.

Inflation in Every Day Life

We received some pretty ugly inflation numbers (up 6-7%) year over year, and we all saw that. It was in gas and groceries and the cars we want to buy - they're all backlogged due to supply chain issues and this is pushing up the price of … well the price on everything is UP! 

Recovering Jobs, but Not Growing Jobs

Some in Washington are trying to put lipstick on a pig and saying things like “inflation is up because the economy is roaring back” and “just look at the massive job growth.” Do you know the number of jobs our economy has added since 2019? ZERO, Zilch, none! All we have done is replace the jobs lost due to the pandemic. What we are seeing is job migration.

Recovery = Location, Location, Location

The economy is starting to look more like a real estate market: Location, Location, Location. Some areas of the country are seeing huge rebounds economically speaking, job markets are roaring, real estate is on a tear and job vacancies are everywhere.

Other areas of the country are still struggling with leadership that thinks shutdowns work. This isn’t working out very well as the parts of the country with the biggest restrictions also seem to be facing the largest resurgence of Covid variants.

Please don’t think I am making a political statement, certainly about vaccines, etc.

The fact of the matter is today the most serious cases we are seeing are among people who are not vaccinated and the areas of our healthcare system that are most strained are in areas with the lowest percentage of vaccinated citizens. We all need to find our equilibrium of safety and protection for ourselves, and our own family and we must accept whatever comes from those decisions. For my family, my 87-year-old mother-in-law lives with us. We've taken many precautions as a result.

That being said, we took a 10-day Caribbean cruise after Christmas (rescheduled like 4 times since early 2020) and of the 7 potential stops, only 4 ports actually allowed us off the ship - so lots more “sea time” which isn’t terrible, and it’s the chance one takes when trying to travel in the days of Covid.

Okay, back to economics. The fact is our economy is going through a massive, generational shift and Covid is accelerating these evolutions:

  1. Real-estate Shifts

    We need to build around 1.6 million housing units a year to keep up with demand. Since 2008, we have a structural deficit of around 13,000,000 units (meaning we have built 13M fewer units than our economy needs.

  2. Education Shifts

    During this time, we have continued to send 18–22-year-olds to college for $50K a year (my daughter graduates in May) while the trades men & women continue to retire and age out of being able to do the hard work of building.

  3. Geographical Shifts

    Covid is seismically shifting WHERE those housing units can and should be built. For the last 40 years in this country, the millennials, gen Z and I-gen have been moving toward cities, draining the suburbs built by their parents and grandparents and moving closer to the culture, energy, employment, and lifestyle associated with cities. Covid is changing that and allowing many more jobs to be done from anywhere. Just as our economy is shifting to “Everything as A Service” - jobs are becoming “work from anywhere” and this has huge implications for housing and the catch up necessary to put stable housing in place for our increasing population.

  4. Economic Shifts

    Inflation is being driven by a whole host of factors from ongoing supply chain issues to increasing demand. No we haven’t added any jobs since 2019 … but we are going to in 2022 and 2023 and for most years in the future. That’s the nature of the job market - we get sharp declines during economic downturns and then we get much longer periods of growth after the economic wildfires have burned out.

So where does this leave us?

How should we position portfolios moving into 2022?

What are we going to do differently?

From a strategic investment perspective, here’s a short answer: Not much differently than we always do.

Here’s the plan:

  1. Protect cash and cashflow

    If you are within 5-7 years of retiring, we want to start building your nest egg of about 5 years of expenses in lower risk assets that may not fully keep up with inflation, but we aren’t going to lose a lot of capital in volatile markets so that money is going to be there when you need it.

  2. Explore specific strategic moves 

    We are going to have some “dry powder” - during more volatile economic seasons, we want some extra money on the sidelines for the express purpose of being able to buy if we actually do get a more significant downturn in the market. This is NOT 30, 40, 50% of your portfolio / net worth. This is 5-15% of your net worth. The further you are from hanging up your paycheck, the less we need to have in dry powder.

  3. Assess Risk Management Strategies

    We are going to buy and hold great world class companies that are doing incredible things and providing amazing products and services to people all over the world, making people’s lives better as a result of their genius and creativity. These companies profit from this work and we benefit as stockholders of these companies.

    We will rebalance, buy, sell and hold a variety of names and companies and the percentage of your portfolio that is exposed to equity risk is going to depend on your risk tolerance, need or willingness to accept risk and other factors unique to your personal situation and circumstances. In the long-term stocks win, but we have to make sure you are able to pay your bills while we wait for them to win - See #1 above!

We have a couple of strategic projects we are working on at Vizionary for 2022:  

Strengthening Strategic Relationship with Wealth Plan Partners

We are working with WealthPlan Partners to advance some of the “behind the scenes” portfolio management. This will be transparent to you, but a huge leap forward for us and for WPP. WealthPlan has proven to truly have the most innovative platform in the industry and the things we are able to do with them is serving you so well in many ways.

You will hear more on this from us about new opportunities in the months to come. Know that any changes are motivated by a desire to fully embrace a fiduciary relationship across all aspects of our client relationship and access to a broader array of investment options than is presently available to us.

2022 is going to be an exciting year for Vizionary. We doubled the size of our support staff in 2021, we are on the search now for at least one more support person and there are a couple of potential advisors who may be joining Vizionary over the next year (which would require additional support people still).

Please know that you are clients of Wayne Wagner Jr. first and Vizionary second. I take my personal responsibility for our relationship to be my primary role here at Vizionary. Adding other advisors will allow us to build scale and opportunities to expand the business, but it’s not an opportunity for me to “pass you off” to a “Jr.” anything.

I am the only Jr. you will work with at Vizionary and that’s because my dad chose to have a Jr. against my mom’s wishes.

We are excited about the year to come. If anything here prompts any questions for you, please don’t hesitate to reach out and we’ll set up time to connect in whatever format serves you best.

Thank you for the opportunity to partner with you this year. Let us know how we can help.

Wayne Wagner Jr., ChFC