Clients often ask us where do we see the stock market going. Our response is one of a historical perspective rather than short term guess. We have no idea where markets are headed short-term and know that over longer periods of time, they will be higher than they are today. The reason we don’t predict the short-term direction of the stock market is that it is guaranteed to be a fool’s game. As proof I thought I would share some of Wall Street’s brightest minds as to what their predictions were for 2022. At the start of 2022 the 15 largest Wall Street brokerage firms were asked for their thought on where the market (S&P 500) would end up for 2022 after ending 2021 at 4766. The “expert’s” sage predictions ranged from a low of 4400 on the S&P 500 to as high as 5330. These experts have access to multi-million-dollar research departments and have their fingers on the pulse of unlimited institutional and corporate knowledge. They see numbers and information that the average investor can’t. They are respected as the best of the best and top of their field. The problem is, every single one of them was wrong. The S&P 500 finished 2022 at 3840. These “experts” were wrong by a range of approximately 15% to as high as 38%. As I said a fool’s game, yet all of these “experts” insist on continuing to play so they will have something to say to motivate the troops to not just sit there and do “something”. “Something” is often very expensive for an investor.
Warren Buffet is credited with the line that we feel strongly about at the High Net Worth Advisory Group. Mr. Buffet said “The stock market is a device for transferring money from the impatient to the patient”. After 37 years watching the market professionally, I will confirm that his words are true. Tough markets test our patience. Tough markets give us the feeling that we need to do something. My grandfather was a financial advisor in the 1920’s and once told me a Wall Street truism that “A great portfolio is like a bar of soap. The more you touch it the smaller it gets”. He did not author that line, only shared it as a teaching point. There is a reason patience is a virtue. It is hard.
So where are we now and what do we do? Looking at the big picture we see inflation still at too high a level for the Fed’s comfort, therefore continued rate increases. We continue to see wage battles and worker shortages. Commodity prices should recede slightly. Government spending will always be out of control as to recent example of the $1.7 Trillion pork package omnibus bill. Corporations are decreasing their spending and preparing for lower margins. Recession is likely. Yet as a reminder, this amazing country has gone through 17 recessions since 1920 and stocks still annualized over a 10% return. Long term thinking continues to win the race. Short-term guessing although mentally rewarding, financially irresponsible.
As in all my letters, I will leave you with an optimistic thought, yet realistic projection about the next year. The team at the High Net Worth Advisory Group is here to help calm your jitters as to finance by sharing time tested, historical and financially responsible advice on how to grow your portfolio on a risk adjusted basis, preserve capital you may need for daily living and the ultimate distribution of your wealth to loved ones when that day comes. The optimistic thought: On January 1st of each new year I look in the mirror and say “This is going to be the best year ever” and it has nothing to do with the stock market but everything to do with the attitude I want to set for myself on how to live my life. The team at the High Net Worth Advisory Group wishes you a healthy, happy and hopefully prosperous 2023!