We sincerely appreciate our relationships with clients and friends and want to say thank you during this joyous season.  May your holidays be bright.  We wish you the best in 2022.

Pundits have been quick to point out that inflation could be a major roadblock to further gains in equities.  However, in almost 100 years of market history, stocks have gained ground, on average, whether inflation is rising or falling.

Yes, stocks have performed better when inflation is moving lower, but they have performed admirably when inflation rates rise as well.  Value stocks and dividend payers tend to do the best.  Stocks have even performed well when inflation is over 6% like it is now (yr/yr).  Supposed market experts may argue otherwise, but equities have long been a terrific hedge against inflation.

Anyone with a large portion of their equities invested in large caps like the S&P 500 has had a great year and may not know there is a lot of weakness under the surface.  Most stocks have undergone a correction of at least 10% at some point this year.  For many individual stocks the correction or bear market continues.  This is especially true for the NASDAQ Composite index which is more of a tech-related “growth” index than the S&P 500.  Here is how much the average stock in the index listed is below its 52-week high:

While this price weakness may be frustrating to some investors, it shows the potential for the market if these stocks advance back towards their 52-week highs. This year the market has been dominated by a handful of mega-caps but the snapback potential of most stocks could help drive the market higher.

THE EARNINGS BOOM

The boom in corporate earnings has been extraordinary over the last two quarters with this quarter’s forecast up 21.2% (source:  FactSet).  Bears point out that this is only a snapback surge and can’t continue as earnings have risen almost 60% off the pandemic low.  They are right.  Earnings will not continue to grow by quantum leaps once we get past 2021.  But let’s instead look at earnings growth since the pre-pandemic peak to get a more accurate reading on just how strong earnings really are.

The graph below shows S&P 500 earnings going back five years, and that earnings for the next 12 months should be 24% higher than they were at the pre-Covid peak.  And while growth has slowed, it is still moving higher. 

Earnings Soared As Real Rates Fall…A Perfect Recipe For Equity Gains

                Source:  Bespoke Investment Group

The forecast for 2022 earnings growth is 9.0% (source:  FactSet).  This is very impressive growth on top of explosive growth this year.  Earnings growth is one of the main themes that could move stocks higher in 2022.

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

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This is achieved through an ongoing assessment of market risks given your specific financial situation and goals.

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Professional Expertise

Leadership Team

Richard Furmanski

Richard Furmanski

CFA

has been a portfolio manager and analyst for over 35 years. He manages conservative, tax-efficient portfolios for both pre-retirees and retirees. His lower risk approach appeals to investors who want less volatility and competitive risk-adjusted returns.

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Mary Ellen Adam

Mary Ellen Adam

Director of Operations

has been in office administration for over twenty years. Her experience includes customer service, firm operations, and office administration. She interacts with our clients on a day-to-day basis and handles any requests that may arise.

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Frequently Asked Questions

If you can't find the answer to your questions here, feel free to give us a call at 847-847-2505

Do you manage both stock and bond portfolios?

Yes. We build a portfolio of conservative, high-quality stocks and hold them for the long-term. The average holding period is 4 – 5 years. Our focus is on stocks that are suitable for retirement portfolios.

Our high-quality bond portfolios are designed to provide both income and stability of principal. Bonds provide the anchor for balanced accounts (those holding both stocks and bonds).

What is your investment philosophy?
We take great care in purchasing only high-quality stocks and bonds intent on a multi-year holding period. Portfolio turnover and taxable realized gains are modest in comparison to other active managers. We do not time the market but will become more defensive, in terms of stock holdings, when market conditions warrant.
Will the portfolio be managed in accordance with my financial goals?
Yes. Each of our clients has a custom-tailored portfolio. These custom portfolios are designed to meet specific client objectives with a thoughtful approach to specific constraints such as risk tolerance. And as each client’s situation changes, the portfolio does as well. There is no cookie cutter approach.
What kind of expertise do you have and how can that help me in difficult markets?
We have been working with high-net-worth clients like you since 1982. Over that time we have helped them to navigate several bear markets and financial crises (including the stock market crash of 1987). We hold the Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) designations.
Are you sensitive to taxes when managing portfolios?
Yes. Our holding period for an individual stock averages 4 plus years which means our turnover is low and realized gains can be carefully managed. Further, where possible, we tax loss harvest small losses as a way of offsetting gains taken elsewhere in the portfolio.
How have you performed?
Results will differ by client and the level of customization but we have provided competitive investment returns for many years.
How do you charge for your services?
We charge a management or consultant fee based upon the size and level of customization of the account. As the account grows, we benefit together.

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Stay up to date with all of our latest comments and analysis.

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Monthly Updates

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As we mentioned in previous commentaries, Barron’s Big Money Poll represents the thoughts of large U.S. investment advisors. Their opinions and forecasts are what is discounted in stock and bond prices.  We think that is important. The recent fall edition of the Poll...

October 2024 Mid-Month Recap

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