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Vizionary Quarterly Update: 2022 Q1

From President Wayne Wagner Jr., ChFC

The first quarter of 2022 seemed to offer lots of reasons not to invest: high inflation, rising interest rates, spiraling oil and gas prices, war, rumors of escalated conflict (is World War III in the cards?). We're watching a possible resurgent viral spread and any number of other shocking headlines.

But truth be told, Q1 was not unlike any other quarter, with our greatest concerns evaporating over time and the worst-case scenario never coming to pass, at least domestically.

This is not to minimize the unthinkable atrocities taking place in Ukraine - more on that in a second.

Reasons for Hope in Humanity

Current events aside, on the financial and social fronts things continue to get better in the aggregate and over time. We’re still lifting thousands from poverty daily, businesses are producing products that improve our lives, and the best of humanity shows up in the darkest of hours.

Have you seen the people waiting at train stations with signs welcoming Ukrainian refugees?

This is the best of who we are as humans— welcoming, caring, giving and serving. As Putin sets his legacy ablaze and the world turns against him, may we each find a way to do something for the millions of Ukrainian refugees pouring into neighboring countries. 

Upcoming Ukrainian Fundraiser 

Here’s my ASK: please keep June 11th open on your calendars if you’re within driving distance to Southern New Jersey. My wife and I will be hosting a fundraiser at our home to support two organizations directly serving those impacted by Russia’s unprovoked war in Ukraine. Details to come soon.

Watching Falling Bonds and Stocks

In terms of the financial markets, Q1 was volatile indeed. But honestly, it FELT more unstable than it actually was—the difference was correlations.

When bonds are trending up and stocks are moving down, our accounts get the cushion from bonds, which are included as an important piece of our portfolios to reduce volatility. However, with rising interest rates, bonds have been moving down too, in some cases pretty hard and fast.

That placed us in a climate where both bonds AND stocks were falling, and when that happens, it can feel like the sky’s falling as well. Add in rising gas prices and most of us felt “worse” than we had the quarter before. 

What About Rising Interest Rates - Any Housing Crashes?

In the midst of this concern, questions arise about whether rising interest rates will cause a housing crash. The answer, in my view, is absolutely not. We as a society need many more houses than we have available to us in the moment, and we can’t afford not to build everything we can for the foreseeable future.

And Oil Prices? Will They Cause a Recession?

I’m also asked if rising oil prices will cause a recession. They could, but prices have already pulled back under $100/barrel, a trend that may well continue over the weeks to come.  

Benefits from Inflation

No doubt, inflation is on the rise, but with it comes certain benefits. Real estate (read: your home) and stocks are assets, and as inflation goes higher, the price of things like your home and your stocks appreciate in value too—not daily, but over time. This will only be bolstered by the rising earnings of great companies.

Also on the bright side, unemployment is at a decade-plus low—companies across industries are having trouble finding workers to fill jobs.

On this point, demographics are at play. At present, 76 million baby boomers are retiring and 81 million millennials are moving into their peak earning years. Stuck in between these two groups is Generation X (that’s ME!). Gen Xers were born in the late 1960s and 1970s (this country’s lowest birthrate decade in the last 100 years), as our nation was in social upheaval.

Not Enough Millennials

As baby boomers transition out of the workforce, we’re left with too few millennials with enough experience to fill the ranks of middle and upper management. This might explain why your child—just a few years out of college—may be tasked with more responsibility and is earning significantly more money than you did at his or her age.

Simply put, there’s not enough talent to fill available jobs, so companies are promoting younger and younger employees and throwing money at their best workers to foster retention.

For perspective, I recently met a 25-year-old who was, to my surprise, the head of a division of a very large financial company’s high-net-worth private client group. Scary stuff if you ask me.

Side note, the young man is terrific, but gosh, could he get just one gray hair before being put in charge of billions of dollars of client money? 

Expectations for the Future

When all is said and done, Q1 2022 hasn’t changed my expectations for the year. We continue to be in store for volatility, a need for calm, and—at least for some—lots of reasons not to throw money into the market.

That being said, I firmly believe the very best opportunities can arise when it feels like a terrible time to invest. For this reason, we’re going to keep our eyes on the horizon, make decisions based on opportunity—not fear—and try to buy great businesses at attractive prices. And all the while making sure you have sufficient cash and protected assets to fund near term costs.

As always, we’re here with Perspective for the Decisions Ahead. Please feel free to call us any time should you have any questions. In the meantime, all of us at Vizionary wish you the very best for a wonderful Spring.

Wayne Wagner Jr., ChFC