This year has been an admittedly painful one for both U.S. and international stocks. Through 9/30/22, and per MSCI Investable Market Index (IMI) data obtained through Bloomberg by Northern Trust Asset Management, U.S. equities are down 24.7%, emerging international equities are down 26.5% and developed international equities (ex-U.S.) are down 26.6%.

U.S. financial markets continued to be under pressure this month, with the S&P 500 Index (a proxy for large U.S. stocks) down over 18% from its 1/2/22 all-time high, the S&P Mid Cap 400 Index (a proxy for mid-sized U.S. stocks) down over 17% from its 11/8/21 all-time high, and the Russell 2000 Index (a proxy for small U.S. stocks) down over 25% from its 11/8/21 all-time high, as of the date of this writing. The pressure may very well continue, as the Fed raises interest rates and withdraws other forms of stimulus to bring inflation under control, but one thing’s for sure – if the Golden Rule is to sell high and buy low, things are becoming much more interesting on the buy side of the equation, particularly for small-cap stocks.

Through 7/31/22, Northern Trust reports negative year-to-date investment returns in nearly all areas of the bond market, with emerging market debt faring the worst (down 14.3%), followed by high yield debt (down 9.1%), investment-grade bonds (down 8.2%), municipal bonds (down 6.6%) and Treasury inflation-protected securities (TIPs – down 5%). The greatest contributing factor to these declines has been the Federal Reserve Bank’s campaign to raise interest rates – specifically, the Federal Funds rate, which is a short-term lending rate that many other lending rates are influenced by. Unfortunately for bond investors, when current interest rates go up, existing (high quality) bond prices come down, as investors demand a higher rate of return on their new investment dollars.

With Gross Domestic Product (GDP) contracting for a second consecutive quarter in Q222, the U.S. economy has technically entered a recession, although many political figures would have us believe otherwise. If we’re not in “recession” already, we (likely) soon will be – financial markets have essentially told us so. Financial markets are almost always ahead of reality, in terms of discounting future earnings, directional moves in interest rates and even seasonal fluctuations in supply and demand. The last 6-12 months have been no exception, with nearly all parts of the market having sold off considerably. Domestic and international stocks are down 19-33%, bonds are down almost 17% and, more recently, even commodities are off approximately 20% from their highs. With respect to the equity market at least, drawdowns of 20% or more like this usually presage recession.

Well, it’s official – we’re now in a bear market! Stocks, as measured by the S&P 500 Index (a proxy for large U.S. companies), have fallen by more than 20% from their all-time highs, while the Nasdaq Composite Index (almost half represented by technology companies) and the Russell 2000 Index (a proxy for small, U.S. companies) have both fallen by more than 30% from their respective highs. Even bonds, as measured by the iShares Core U.S. Aggregate Bond ETF and generally considered a safer type of investment, are down by more than 13% from their recent peaks. Right or wrong, markets have priced in a recession, very few things are working for investors, and it’s easy to understand why many people are feeling a sense of despair. It’s also the exact time when investors need to be reminded of the Golden Rule – sell high and buy low.

If you’re in your 50s, o.k. early 50s, you probably remember a time when a gallon of gas cost less than a dollar, when a gum ball cost a penny and when a giant shopping cart of groceries cost less than $100 – ah, the good old days. Today, gas is over $4 a gallon, a gum ball costs a quarter and your hundred dollars probably buys you half a cart of groceries, if you’re lucky. That’s inflation folks and it can become more pervasive when governments implement poor policies, when input costs rise, and when demand exceeds supply.

A bridge loan can be thought of as a short-term funding mechanism to “bridge” the gap between a project’s inception and its eventual completion, at which point more permanent financing is generally, but not always, put in place. It’s effectively a short-term loan, collateralized with assets that may or may not be related to the final project itself. The terms and types of bridge loans can vary, but their use can offer a variety of benefits to those that take advantage of them, turning otherwise undoable projects into viable long-term endeavors.

Annuities have been around for many, many years and can be considered an investment product with an insurance-like attribute. They can be in accumulation mode or annuitization mode, they can be immediate or deferred, and they can be fixed or variable. They can also be treated very differently for tax purposes, depending on whether the annuity is held in a non-qualified or qualified account. Here’s what you need to know about these products, and how they may or may not fit into your overall financial plan.

Many people may be finding it easier to prepare their year-end tax returns since the Tax Cuts and Jobs Act was passed in December of 2017. At that time, the below-the-line standard deduction nearly doubled from $6,500 to $12,000 for individuals, and from $13,000 to $24,000 for those who were married filing jointly. This led to far more people taking advantage of the standard deduction at year-end, as opposed to itemizing deductions for things like medical expenses, home mortgage interest, state and local income tax, sales tax, and property tax, since the new standard deduction became larger than all of one’s itemized deductions combined for most taxpayers.

The economy fired on almost all cylinders in 2021 and the S&P 500 Index is up approximately 26% through late December, versus 16% for all of 2020. While growth is expected to continue, it will likely slow, equity valuations are full, and anticipated headwinds should result in positive, but more moderate investment returns in 2022.

In 2009 and in the wake of the Great Recession of 2008, the first digital currency was created by an individual or group of individuals identifying themself as Satoshi Nakamoto – a new “cryptocurrency” known as Bitcoin. Bitcoin is now one of over 7,800 different digital currencies in existence according to CoinMarketCap and it represents approximately half of the total market value of all cryptocurrencies combined.

In 2014, the Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act created a mechanism whereby disabled Americans could establish a tax-advantaged savings account, appropriately referred to as an ABLE account, to supplement their lifestyle needs. As defined by the Social Security Administration (SSA), being disabled is described as the inability to do any substantial gainful activity by reason of any medically determinable physical or mental impairment, which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

In the investment world, and perhaps in life, there has always been a battle between the actions we should be taking and the actions we actually do take. It’s a battle between the impulsive part of our brain and the rational part of our brain and, unfortunately, the impulsive part of our brain often prevails. Human nature and our own innate biases work to our detriment in this regard and usually to the detriment of our portfolio returns. To understand why, we need to explore the foundations of neo-classical economic theory versus the principals of modern behavioral economics.

Inflation seems to be top of mind lately, garnering the attention of economists, political pundits, business owners and laymen alike – but what exactly is inflation, how is it measured, what’s considered to be normal, and how high is it now? Also, what’s been causing prices to rise, how does the Federal Reserve Bank feel about recent inflationary trends, and what’s the bond market suggesting about the short-term or long-term nature of these trends?

What can I say – your rich Uncle (Sam) wants a cut of your financial well-being each and every year, and he’s quite serious about collecting His share. When and how he goes about doing so can take many forms, including weekly/bi-weekly payroll withholding, withholding from traditional Individual Retirement Account (IRA) distributions, estimated quarterly income tax payments, and/or a lump sum payment at the end of each year. One way or another, he’ll get what’s coming to him, for how else could we afford to keep this great Country running?