September 2022 Market Commentary

Our latest notes on the market

The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function

-F. Scott Fitzgerald


The stock market tumbled Friday, August 26th after Fed chairman Jerome Powell showed more commitment to raising interest rates than traders had hoped for. Our read of the speech did not find anything new. Importantly, interest rates barely moved following the speech, and inflation expectations moved down slightly.


As investors, the fundamental circumstances are unchanged. The strength in the market over the past few months has triggered some rarely-seen signals that argue for attractive gains going forward. Meanwhile, leading indicators signal continued weakness in the economy, which should reduce corporate earnings and stock prices. Rarely are the signals from the market and the economic indicators so disconnected. In isolation, they each make convincing cases for opposite conclusions.


How should one reconcile the two? Our answer is that clients should be mostly invested, but keep some cash on hand should the market decline further. We don’t expect the market to breech the lows it reached in June. And we think that, zooming out, returns over the next year or two will be good. But, per our process, it is not yet appropriate to signal “all clear”.

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