Q3 2022 Newsletter

Oct 13, 2022

Market Recap

Global stock and bond markets rallied to begin the third quarter, however, investor optimism soon faded resulting in a third consecutive quarter of negative returns. Concerns over stubbornly high inflation, aggressive rate hiking from central banks, and a slowing real estate market caused all major indexes to decline (see chart below). As a result, in late September the S&P 500 Index touched its lowest level since Q4 2020. There are some positives, though, as global equity market valuations have mostly fallen below their 25-year average and parts of the US economy such as the labor market remain resilient against a backdrop characterized by slowing economic growth and inflationary pressures.

Over in fixed income markets, a historically bad year continued in the third quarter as concerns over future tightening from central banks caused prices to decline further. In particular, traditionally safer assets such as treasuries and other government securities sold off as investors looked to mitigate the downside risk from rising rates by fleeing into higher-yielding investments.
Meanwhile, more speculative areas of fixed income such as high yield performed relatively well compared to those of higher credit quality. This was primarily due to attractive valuations and default rates which are projected to remain low in the near term. Unless this downward trend in fixed income reverses before year-end, it’s likely that we’ll see broad stock and bond market indexes both post negative calendar year returns for the first time since 1969.

Looking ahead, nobody really knows when the current bear market will end, and the recovery will begin. We do know, however, that the S&P 500 Index has never failed to recoup the losses sustained in a bear market and trying to time markets is a fool’s game that rarely ever rewards long-term investors. This is primarily because markets are a highly efficient discounting mechanism that tends to move based on catalysts that won’t occur for another 6-12 months. That being said, it’s likely some investors’ will still be tempted to time markets over the coming months, but we strongly believe that sticking to a diversified investment strategy based on your long-term plan is still the most prudent option over the long haul.

Q3 2022Trailing 12
Trailing 3
Trailing 5
S&P 500-4.88%-15.47%8.16%9.24%
Russell 2000-2.19%-23.50%4.29%3.55%
MSCI All Country World Ex-US-9.91%-25.17%-1.52%-0.81%
Bloomberg US Aggregate Bond-4.75%-14.60%-3.26%-0.27%
Bloomberg Commodity Index-4.11%11.80%13.45%6.96%
MSCI US Real Estate Inv. Trust-11.55%-17.80%-1.66%3.02%
*Performance data is through 9/30/22. Data according to Morningstar Investment Research. Return periods greater than 1 year have been annualized.

Parents Coping With Inflation: 4 Ways to Cut Costs

The hottest inflation we’ve seen in four decades is impacting everyone these days, but it’s especially hurting parents with children to provide for. Raising kids has never been cheap, but the recent spike in inflation has made it an even more expensive undertaking. In fact, a recent study by the Brookings think tank showed the average cost of raising a child born in 2015 to the age of 17 has increased by 9.14% since the study was last published in 2020. This has forced many parents into making tough decisions about how they spend their money or where they live. Luckily, if you’re willing to make some adjustments there are ways to reduce your everyday costs without drastically reducing your quality of life.

Food Costs

One strategy for dealing with higher food prices may be reducing your trips to popular bulk warehouse stores. Although this might seem counterintuitive, buying in bulk can lead to significant food waste or overspending on items that aren’t necessities. As an alternative, try buying only the groceries you’ll need over the next few days at one of your local “lower cost” stores.

Gas Expenses

Despite a recent drop between July and August, gas prices are still approximately 20% higher than they were a year ago which particularly hurts car-dependent families. While we may have little control over gas prices, replacing an SUV or truck with a more fuel­ efficient/compact vehicle can help ease the burden on your bank account. Carpooling or piling into one car on long trips can also help.
If you have driving-age children, try budgeting their monthly mileage until gas prices normalize and use it as an opportunity to teach them about making good decisions with money. You might be surprised by how they react!

Television & Cell Phone Bills

By this point, you’ve likely heard of the “cord-cutting” phenomenon that’s sweeping across the country. This movement shows no signs of slowing and should only continue to pick up steam in the years ahead. If you haven’t already made the transition, several of the big-name streaming TV providers such as YouTube TV, Hulu + Live TV, and Sling offer an experience similar to cable/satellite TV for a fraction of the cost – all you need is quick internet service!

Most of us have assumed for years that major wireless phone providers are superior to other options from MVNO’s (mobile virtual network operator). However, after doing some research you might discover the dirty little secret that many discount wireless providers use the networks of bigger providers. Some of the more well-known MVNO’s like Cricket Wireless (AT&T) and Boost Mobile (T-Mobile and AT&T) can offer you the same service at better prices.

Everything Else

With only so much fat that can be trimmed on necessities, you may need to look at items such as entertainment or dining out for additional savings opportunities. Spending $20 on a family movie night at home versus a $100 trip to the theatre or learning to cook your favorite takeout food at home can make a huge difference. Furthermore, it’s a great way to show your kids that you can still have fun without spending a lot of money!

Be Careful when Titling Assets

Over the years, we have seen clients do numerous things, and one common mistake we see is individuals changing the title to an asset or financial account simply out of convenience and allowing another individual to access this asset(s) without understanding that these decisions can have legal and/or potential tax ramifications. This is very common with bank accounts, brokerage investment accounts, and property deeds when an individual wants to grant someone else (typically a non-spouse) access to the account to help monitor the asset, pay bills, or simply avoid probate in the event of death. It’s important to understand that upon changing the title or adding a joint party to an account or deed, that person assumes legal ownership over a portion of the asset or account. In the event that person ran into an issue with a potential creditor or something similar, then the entire asset could potentially be put at risk in the event of a negative judgment or garnishment. In addition to potential liability issues, simply adding non-spouses as a joint party on a financial account or deed without any other consideration is also deemed a gift and may require that a gift tax return be filed if the amount exceeds the annual gift exclusion amount set by the IRS (currently at $16,000 / individual in 2022).

Before simply adding another individual onto the title of an account or deed, it’s best to check with a tax, legal, and/or financial professional to ensure you are fully aware of legal and tax considerations before implementing such a change. We often find a better and more appropriate solution may be to add a financial power of attorney to help handle financial affairs in the event you are unable to make financial decisions or execute financial transactions, place a beneficiary designation such as a Payable on Death or Transfer on Death on a financial account which helps avoid probate, or simply add a “View Only” authorization on bank and brokerage accounts which allows a third party to help monitor accounts as a backup fonn of assistance and monitoring.

Fighting Fear With a Financial Plan

With most major asset classes down considerably this year and no shortage of anxiety-inducing headlines from financial media, it’s understandable that investors might feel the temptation to sell investments or drastically deviate from their long-term investment strategy. However, we believe the best way for individuals to fight these feelings is by shifting the focus back to their financial plan and the things they can control like saving and spending. After all, achieving your long-term financial goals is about much more than short-term investment performance.

If you need a fresh perspective rooted in facts rather than fear, we recommend meeting with a certified financial planner (CFP), such as Ryan or AJ, to develop a personal financial plan.
Thereafter, you should plan on meeting at least annually to make any necessary updates to your long-term plan.

If you have questions or would like to discuss any of the information contained here in greater detail, please do not hesitate to contact us.


AJ, Ryan, Gary, Rhonda and Tom AJ Gilbert, CFP® Ryan McCafferty, CFP® Gary Fortier, CPA Rhonda Gilbert, CPA Tom Savage, CPA

Keystone Financial Group, Inc. does not provide legal or tax advice

The contents of this email and any attachments are confidential and intended for the named recipient(s) only. If you are not the intended recipient(s) (or have received this email in error) please notify the sender immediately and destroy this email. Any unauthorized copying, forwarding, disclosure, or distribution of the material in this email is strictly prohibited.

The indices mentioned are not managed and cannot be invested in directly. Past performance does not guarantee future results. Diversification and asset allocation strategies do not assure a profit or protect against loss.

Sources used for the article:

  • *T Rowe Price Investment Research
  • *JP Morgan Investment Research
  • *The Balance
  • *Ntellivest

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