2023’S DASH FOR TRASH

The market has turned upside down in early 2023.  This year has been about huge gains in stocks that got destroyed in 2022.  The stocks that were down the most last year are some of this year’s best performers.  For example, busted IPOs, SPACs, electric vehicle stocks, fintech, and many stocks with aggressive price-to-sales valuations, little/no earnings, and poor balance sheets have come back to life.  This year’s stock market has been a dash for trash.

During the same time, quality stocks, especially high quality, have barely moved this year as shown by these market averages returns through Friday, February 10th:

NASDAQ Composite (tech heavy, includes many low quality stocks); +12.0% YTD
S&P 500 (a mix of high and low quality stocks); +6.5% YTD
Dow Jones Industrials (large cap, high quality blue chips); +2.2% YTD

It has been frustrating to watch many quality stock portfolios tread water this year.  If this is truly the start of a new bull market, quality stocks will have to participate more fully.  In our last commentary, we questioned the staying power of this rally.  We think the same today.

Both the bulls and bears have been emboldened by this rally.  We don’t sense any level of capitulation on either side.  Bulls point to market tailwinds which include:

–  downtrends breaking
–  strength in transports and semis (leading indicators)
–  inflation has peaked
–  strong seasonal period
–  market internals remain strong

Bears cite market headwinds such as:

–  recession indicators abound
–  there is now an alternative to stocks
–  the market is very overbought in the short-term
–  S&P 500 valuation back to 18x 2023 forecast earnings

This week is a critical test for the bulls.  Will they come back and “buy the dip” after last week’s decline?  Or will the bears have the upper hand given a mixed earnings season and 2023 profit estimates still being cut, along with a looming recession.  Quality stocks will be the focus.  Quality cushioned the blow in last year’s steep decline, but have to get going in the weeks and months ahead for this thin rally to continue.

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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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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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