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2022

Ask Cadence: Is the recent pullback in stocks almost over? Can I safely invest now?

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We don’t think so, and no, it isn’t safe to invest in markets now. Growth has been slowing in recent months and we anticipate the slowdown will accelerate. This was likely even before inflation hit 8.5% and key borrowing rates spiked across the board. Both of these things have and will probably continue to reduce consumption and overall economic activity. The slowdowns we’ve experienced over the last 12 years since the financial crisis didn’t face these same challenges. In addition, stocks remain historically stretched in terms of their price relative to more grounded metrics like sales, cash flows, and overall...
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The Netflix Eruption

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As we addressed in the Monkey and the Volcano parable, there eventually comes a time when extreme volcanic pressure releases itself all at once. Markets are no different. Extreme buying pressure over time inevitably leads to sudden eruptions that send prices falling; in many cases faster than they went up. In markets as with volcanos, energy and volatility doesn’t disappear, it simply transmutes into another form. If you’ve been paying attention to financial markets the last few weeks, you’ve probably picked up on the fact that this process seems to be playing out currently. Netflix has been a good example...
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The Monkey, the Volcano, and the Dangers of Rationalizing Risk

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Half way up the slope of a volcano lived a monkey. Like his fellow monkeys, he spent the majority of his days picking and eating fruit off the trees growing on the side of the volcano. Unbeknownst to his friends, however, he dreamed of one day opening his own banana pie stand where he could spend his old age providing delight to others, just making and serving pie, passing the time in enjoyable conversation. And picking lice, of course. He dreamed this every day as he foraged, and it made him happy. But he knew he would only get there…

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How Should I Know If My Diversified Portfolio Returns Are Good Enough?

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It’s not easy for a diversified investor to know what their investments should be returning over most time frames. Just because the S&P 500 is up 15% this year, should you be too?  The S&P 500 plus dividends was up 40% over the past twelve months, but since you have a diversified portfolio, what is a normal return for you over the same period?  For any short-term period, like a year, how do we know if we’re still on track, or if our returns show something has gone wrong? Given the amount of media coverage large cap US stocks receive…

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Pick Your Poison

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We typically operate day to day within the guardrails of precedent, making decisions and evaluating outcomes based on what we’ve observed and those things that have played out in the past. Certain rhythms repeat for certain reasons which is why more times than not, this modus operandi not only makes sense, but is wise. There’s a reason we should respect and learn from our elders. There’s also a reason why as we age, we tend to become a little jaded about certain things – we often see the same mistakes being made over and over again. The boom/bust cycle is…

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