The stock market is not the economy (and it has never been more true).  The markets are experiencing a moment of optimism after suffering the sharpest drop into a bear market in history.  The magnitude of the recent price gains seems to be very optimistic regarding the forward path of economic normalization and earnings growth.  The S&P 500 rose 12.7% in April and is up about 30% from its March 23rd bottom.
 
Is the coast clear?  We don’t think so.  Markets should be careful about reading too much into the last seven weeks of gains.  The S&P 500 is still down 15% from its February high and off 11% year-to-date.  The equal-weighted S&P 500 is down 19% year-to-date.  And the median stock price is off about 25% from its peak.
 
The economy, meanwhile, is in apparent freefall.  GDP fell –4.8% in Q1, the biggest drop since the Great Recession, and expectations for Q2 are the stuff of nightmares (estimates range from a decline of -15% to -40%).  The economic pain is most apparent in the labor markets.  Job losses have been staggering and in only two months’ time dwarf job losses in prior recessions, as shown below.

The unemployment rate now stands at 14.7% compared to 3.5% in February.  Still, the economic reality is much worse than the jobs numbers suggest as a result of how the government statisticians calculate the employment figures.  For example, there has been a steep drop in labor-force participation which is not reflected in the numbers.  It also doesn’t include those who are now involuntarily working part-time, or otherwise have their hours reduced as businesses operate in restricted ways.  In reality, one in five Americans is out of work, in our view.
 
Economists debate about the ‘shape’ of the recovery.  Of course, no one can know for sure, but we are skeptical of any hopes for a V-shaped recovery.  Markets may be latching onto some optimism that some states are reopening, but a gradual lift-off from current shelter-in-place regulations is not the same as a broad economic recovery here or abroad.  The market is not only under-appreciating the labor-market damage, but it’s also underestimating the duration of the global recession.
 
Our intent here is not to focus only on the bad because there are plenty of positives (low interest rates, Federal Reserve stimulus programs, U.S. Government stimulus packages, resolve of the American people and other factors).  Maybe the biggest positive is the Fed ‘put’ – that is, the Fed has announced they will provide as much liquidity as necessary and are viewed as a backstop for the markets.  But fundamentals still matter and right now the future is less certain than ever.  Stock prices at these levels assume the recovery falls neatly into place.  However, if more layoffs flip from temporary to permanent, more hours are slashed, and workers face challenges in finding a new job, investors will need to rethink current stock market levels.
 

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?

Real Retirement Solutions

designed to improve
  • Wealth Preservation
  • Management of Risky Assets
  • Peace of Mind

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

Get Started

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.

View full bio

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.

View full bio

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.

Recent Commentaries

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

January 2025 Market Commentary

The S&P 500 has had a 20%+ return for two years in a row. It has only rallied 20%+ in back-to-back years three...

November 2024 Market Commentary

With an YTD gain of 22.1% through yesterday, the S&P 500 is on pace for its second annual 20% gain in a row. Surprisingly, that has only happened two other times:  first, three times in a row from 1954-56, and second, four years in a row from 1995-98.  However,...

October 2024 Market Commentary

China may be our biggest adversary, but the health of their economy and markets are important to the U.S. They are a major trading partner and their markets contribute to overall global stability. Chinese policymakers are finally alarmed enough to shift out of low...

September 2024 Market Commentary

August was a roller coaster for stocks. Moves lower in a roller coaster market can be terrifying, and in the first three trading days of August, investors had to contend with economic data showing what looked like a sharply decelerating economy and the unwind of the...

Monthly Updates

November 2024 Mid-Month Recap

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

INVESTORS BALANCE SHEET – PROS AND CONS Here are a few of the pros and cons investors should consider when forming an opinion of the stock market.  It is always important for investors to look at both sides of the argument even if they feel strongly in one direction,...

As a current or near term retiree you have real concerns…

We provide dedicated solutions
Contact Us