Market Letter September 2022

Market Letter September 2022

| September 27, 2022

Market Letter September 2022

Trust the Plan

Over the past 11 market days, the S&P 500 is down 12% and now at the same levels of the June lows. This is an extremely oversold condition. In fact, the last time we experienced such a decline was also in June 2022. We also experienced this steep decline in a short period of time during the March 2020 COVID panic, August 2011 when the US credit rating was downgraded, and in March of 2009 when we hit the lows of the Great Recession. 

What is causing the drop this time? Similar to June, Inflation remains stubbornly high causing the Fed to raise rates quicker than any time since the early 1980’s, and continuing to threaten higher rates in the near future, making a soft landing more difficult if not impossible. Technically, recession is here but risks of full-on recession are increasing dramatically.

The average decline for the S&P 500 in a recession is around 30% and so far we are at about 25%. Therefore, we believe much of the recession risk is already baked into the market. The 2001/2008 recessions were particularly difficult with the market down over 50% in each case, but we do not believe we are in that type of environment.  It may be likely that economic data will continue to worsen, but we are reminded that the market is a leading indicator - it leads us into recession, and it also leads us out. Therefore, we expect the market to bottom before the economic rebound begins. 

Trust the plan! Oftentimes, uncertainty will cause anxiety and we start to question the plan. This is exactly why we build conservative financial plans for all our clients. Let’s focus on the big picture - is your plan still on track? Let’s update your plan - call the office or click the link below and schedule with us to verify.


In closing, let us recall the S&P 500 has returned 10% annualized since 1928 with an average intra-year drawdown of -16.3%. There's no upside without downside, no reward without risk. Please review the chart below, which illustrates this point.