It was late fall of 2019 when plans were set in motion to professionally manage money. I’d already had over 12 years of experience in markets and had been through a financial crisis in 2008-2009, and a double dip recession fear or two, and a late 2018 taper tantrum. What I didn’t personally live through, I studied in depth. The Great Depression, WW2, the dot com boom and bust, and countless other economic and business cycles. I’d seen it all… until I hadn’t.
As I was studying for and passing my licensure exams, news had begun to swirl about a virus in China. During the holiday season in late 2019, the topic was a talking point at holiday parties and family gatherings. A virus that seemed specific to China at the time soon had us all locked inside our homes. My first accounts under management had gone to nearly 95% cash by mid February. That was a scary event, even for the most seasoned asset managers. I had no playbook for a global shutdown of nearly the entire world economy. As central banks of the world lead a coordinated effort to stimulate economies and markets, cash was put back to work across client accounts and 2020 turned out to be a great year, all things considered. NOW I’d seen it all… until I hadn’t.
Fast forward two and a half years. Add to the list of things I’d never seen:
The fastest bear market in history to the fastest bull market in history. The most fiscal and monetary stimulus dumped on markets in history, leading to the highest inflation in 40 years, causing central banks to reverse course at the fastest pace in history, throwing us back into a bear market lasting longer than any other bear market in over a decade, inept politicians worldwide, even more inept central bankers worldwide, a few more Covid lockdowns and reopenings, supply chain issues, geopolitical turmoil including but not limited to disruptions in commodity supply, mass casualities, and most recently the threat of nuclear retaliation. Did I miss anything?
The past two and a half years can be characterized as something of a “shock cluster.” Alan Hawkes, professor of mathematical finance derived a statistical model demonstrating that seemingly random and unlikely events can cause additional events to occur in a sort of self-exciting process. And self excited we are. The antidote to excitement is less excitement, more boring. We’ve never needed boring so badly.
That brings us to markets. In the coming days you will see a three part series from us at JSPM LLC covering the investment landscape as we prepare to round out 2022 and head into 2023. I think you will find it insightful. Stay tuned.
Trent J. Smalley, CMT
P.S. You may have noticed it has been a while since my last post. On May 20th this year I lost my best buddy, Simon the Beagle. I have never posted a blog without him under my desk. It took me a while to want to do this again without him. This is dedicated to him across the rainbow bridge as well as to my new buddy, Enzo the Beagle puppy, who has chewed through the legs of that very same desk.