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Vizionary Quarterly Report Q1 2023

A quick reminder to you our clients - your quarterly reports are available and can be viewed through your Client Portal.

By Wayne Wagner Jr.

The first quarter of 2023 has the markets at odds with the headlines. While the headlines are covered with bank failures, indictments, ongoing conflict around the world, the markets have been climbing this wall of worry a bit higher. Indexes have been volatile but positive year to date.

What gets lost in translation is the actual data: the Federal Reserve continues to tighten monetary policy which is making it harder for businesses to get loans.

What’s to Come In the Banking Landscape?

Corporate profits appear to be rolling over as ongoing labor costs and inflation pressures weigh on earnings. Additionally, bank failures and rising interest rates are causing seismic shifts in what Americans do with their cash.

People are moving it out of bank deposits and into higher-yielding assets which is causing a soft ‘run’ on bank deposits. This is in addition to some of the hard run on assets we are seeing as individual banks.

As a result, banks are also starting to come to terms with longer-term problems in their loan portfolios in the form of commercial debt that will roll over in the next few years. This debt will have to be refinanced but at much higher rates. It will likely create a constrained lending environment which will inevitably lead to higher defaults and downward pressure on bank balance sheets.

This is how we get wider spread “contagion”, if we are not careful. None of us want to be in the shoes of the regulators trying to navigate this morass.

These areas combine to paint a challenging picture for the markets over the next 1-2 years. This on the heels of what we now have which is a roughly two-year period of zero returns for the market. Take a look at the two-year charts for the major stock indexes. We largely have a lot of volatility but no real movement.

This is not a rosy picture, but I believe it is a realistic one. So let’s briefly discuss expectations and what to do about this.

Expectations and Actions

As far as expectations, I’m anticipating ongoing volatility for 2023 with potentially some attractive entry points later in the year. In response, here are a few of the actions we are taking or are looking to take as we manage your wealth.

Protect and Advance 

Protect your near-term cashflow needs and patiently wait for the opportunity to advance. While many of us may look at 1, 2 or 3-year returns and see them not keeping pace with our longer-term expectations, we need to remember:

  1. When the markets are moving downward it is important not to have unrealistic expectations or be tempted to start deviating from the long term plan
  2. Protecting “dry powder” during market declines is what will help us position for future advances

Maintain Reduced Equity Exposure

Not none, but generally reduced exposure. Keep this exposure weighted toward dividend-paying and dividend-growing companies and minimize exposure to small companies and non-US companies that will raise risks in unnecessary areas like currency risks, etc.

Gather Income Where We Can

Use short-term bonds, not cash, for higher current yields. It will be very important moving forward to manage the “duration” of the bond portfolio. Currently, short-term bonds provide our best risk-adjusted return, but as we move further through this, other opportunities in the bond space will become more attractive. Consider insurance products to protect the downside for a portion of your portfolio.

A Final Note

As you may imagine, this is more of the same from our team.  There will be brighter days ahead, but we will have some rocky times between now and days of smoother sailing.  Be patient. Stay the course. Protect and advance. We are watching the markets and looking for opportunities where we canl adapt allocations as appropriate in the weeks and months ahead.

Reach out to us anytime.  We are always here with Perspective for the Decisions Ahead.

Have a wonderful Spring.

Wayne Wagner Jr.

Advisory services offered through WealthPlan Group, a DBA for WealthPlan Investment Management, a subsidiary Registered Investment Advisor of WealthPlan Group, LLC. WealthPlan Group, LLC is not a registered investment advisor, but is the holding company for WealthPlan Partners LLC and WealthPlan Investment Management, LLC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

No investment strategy can assure success or completely protect against loss, given the volatility of all securities markets. Statements of forecast and trends are for informational purposes and are not guaranteed to occur in the future. All performance referenced is historical and is no guarantee of future results. Securities investing involves risk, including loss of principal. An investor cannot invest directly in an index.

The information in this communication applies solely to the intended audience and in no way amends, revokes, or otherwise alters the existing agreements and relationships between WPIM and its clients. This communication is not a binding offer, expressed or implied. WPIM undertakes no obligation to update or revise the information herein or in any referenced third-party resource due to new information, future events or circumstances, or otherwise.

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