“…the number of stocks in deep bear markets, 30% or more below their highs, reached ever greater levels last week. If a market is on the mend, or even about to turn higher, this figure should contract, not expand” ― Lowry’s Institutional Research Analysis 10/07/2022
“…the weight of evidence, does not yet support the beginnings of a lasting advance.” – Lowry’s (ibid)
Current State of the Markets?
Some of you emailed me about the big up days that occurred early last week – Monday and Tuesday – the thought being that the pain was over. The fact is, “market noise” is very typical in bear markets. In September 2008 there were two back-to-back ‘up’ days just like that. Then, THREE sets of similar back-to-back gains in late November and early December 2008. Buying back into the market then, meant waiting until mid-2009 to break even on that. It rarely pays to invest according to news headlines. Typically, when a bear market really ends and turns back up, there are out-sized opportunities to buy on the cheap. For now, I’m maintaining a larger amount of cash (money markets) and looking at certain “hedged” funds in order to stay somewhat invested and remain patient. We also have 2 new private, stable interest-bearing funds.
What the markets want to know is when the interest rate tightening will end, and second, how deep the recession will be (global and U.S.). The old saying is “The markets will stop being scared when the Federal Reserve starts being scared” – which means when the central bank starts to fear real damage, to employment, corporate profits, consumer spending and income, THEN it will resume market friendly policies with regard to interest rates. It is already unprecedented to raise interest rates in a period of economic weakness.
September was a very bad month, with the averages falling 9 – 10% and more. But more telling, the best dividend paying stocks – the ones that should be at least SOMEWHAT safe in a downturn were hit almost the worst. The so called “dividend aristocrats”, i.e. companies in the S&P 500 that have raised their dividends in EACH of the past 25 consecutive years, were down 9.15% in September.
Final point: Fidelity is about to offer a “private” (meaning not on the stock market) credit fund that preliminarily may pay a dividend around 9%. It should offer a fairly stable principal because it is private. I will be learning about this fund on Thursday October 13th. It will be somewhat similar to the Blackstone Credit fund that I mentioned last month. Please contact me to get on my calendar to discuss.
How Did the Markets and Our Funds Do in Sep 2022?
|Russell 2000 (small co)||-9.58%|
|US Aggregate Bond Treasury||-3.45%|
|FSTA||-8.38%||Fidelity Consumer Staples||ETF|
|FDFAX||-8.81%||Fidelity Consumer Staples||stock mutual fund|
|FSLVX||-9.56%||Fidelity Large Cap Value||stock mutual fund|
|FSMVX||-10.04%||Fidelity Mid Cap Value||stock mutual fund|
|FCPVX||-9.61%||Fidelity Small Cap Value||stock mutual fund|
|IDIVX||-8.38%||Integrity Dividend Harvest||stock mutual fund|
|PRFDX||-9.36%||T Rowe Price Equity Income||stock mutual fund|
|FSUTX||-10.03%||Fidelity Select Utilities||stock mutual fund|
|CFRAX||-2.10%||Catalyst floating rate||income mutual fund|
|EIFAX||-3.27%||Eaton Vance floating rate||income mutual fund|
|FFRAX||-2.29%||Fidelity floating rate||income mutual fund|
|RNDLX||-5.09%||RiverNorth Strategic||income mutual fund|
|FAGIX||-4.47%||Fidelity Capital & Income||income mutual fund|
|Starwood REIT, class D||0.78%||Aug*||real estate investment trust|
|Blackstone REIT, class D||1.00%||Aug*||real estate investment trust|
|Blackstone Credit Fd, cl D||1.40%||Aug*||private lending trust|
|Prime Meridian Real Estate||0.31%||Aug*||private fixed return|
|KIP, Kay Income Partners LP||0.56%||Sep||private mortgage fund|
(Courtesy Morningstar Workstation)
* 1-month reporting lag