Just when it started to feel like the crises of 2020 and 2021 were starting to fade, 2022 had other plans for us. In response to the economic devastation and bear market ensuing from COVID and the shutdowns around the world, the Federal Reserve announced in 2021 that there was no limit to the amount of monetary support that it would provide to the economy. This took the forms of direct stimulus payments, forgiven business loans, and an astronomical amount of money creation. The market fully recovered the COVID related decline in under six months and then rocketed to new heights, propelled by this cash. In the second half of 2021 and first part of 2022, reality set in.
Inflation exploded to 8% and has risen since then. The Fed struck back with an aggressive plan of rising interest rates designed to slow the economy and bring prices back under control, resulting in a deep bear market for both stocks and bonds. Exacerbating the volatility was the largest attack on a European state since World War 2 on February 24th when Russia invaded Ukraine. These crises are far from over, and neither is COVID. After over a decade of relative calm, a roaring bear market, a raging bull market, and then another angry bear occurred within 36 months.
Although not a global event, many of our lives were changed forever in Southwest Florida by Hurricane Ian on September 28th. Few of us will soon forget the screaming wind or pounding water, how quickly the sea came in, and the utter destruction of our coasts and islands. Even now as I write this letter, many boats remain on land and many cars and homes in the water.
We know that "this too shall pass", but new challenges will always await us. As we have said time and again, we do not live in a world that moves from periods of crises to periods of calm. The world goes from one crisis to the next and the next. We must live and make decisions in a world we cannot predict, where literal and figurative storms occur periodically, and yet where growth and opportunity arise in the wake of – and even because of - these very storms.
Principles
We are long-term, goal-focused, and plan-driven investors. We believe that lifetime investment success comes from acting continuously on our plan. Likewise, we believe that substandard returns or even lifetime plan failure comes from reacting to current events.
The unforeseen and unforeseeable chaos of the last three years since the onset of the pandemic demonstrates that the economy can never be consistently forecast, nor the market consistently timed. Therefore, we believe that the most reliable way to capture the full return of capitalism is to ride out its frequent but historically always temporary declines.
We believe that the essential challenge in personal investing is neither intellectual nor financial but rather emotional, and that investment success comes to investors that can remain patient and disciplined while others are not. We work to help ensure that our clients are mentally prepared so that they can possess this advantage for themselves and their loved ones. Our clients have proven us correct in this belief throughout our entire careers, particularly over the past three years. These will continue to be the bedrock convictions that inform our investment policy, as we pursue your most important financial goals together.
2022 In Review
Unrelieved chaos continued in 2022. The central drama of the year – and, it seems likely, of the coming year – was the Federal Reserve's belated but very aggressive efforts to bring inflation under control.
After rising almost 394% in the 12 years between the trough of the Global Financial Crisis (March 9, 2009) and January 3, 20221 , the US Equity Market sold off sharply; at its most recent trough in October, the S&P500 was down approximately 27%. Bond prices also swooned in response to sharply higher interest rates.
It is noteworthy that, after the serial nightmares through which it has suffered since the onset of the pandemic early in 2020, the S&P500 managed to close out 2022 somewhat higher than it was at the end of 2019 (3840 vs 3231, a gain of approximately 19%)2 . Not at all bad for three years during which our entire economic, financial, political, and geopolitical world blew up. If anything, this validates our core investment strategy: stand fast, tune out the noise and continue to work the long-term plan. This continues to be our recommendation, and in the strongest possible terms.
The burning question of the hour seems to be whether and to what extent the Fed, in its inflationfighting zeal, might tip the economy into recession at some point if it hasn't already done so. Over the coming year, the way this plays out may determine the near-term trend of equity prices. This outcome is simply unknowable, and one cannot make rational investment policy out of the unknowable.
With that said, we continue to believe strongly that whatever it takes to put out the inflationary fire will be worth it. Inflation is a cancer that affects everyone in our society; if recession proves to be the painful chemotherapy that is required to destroy that cancer, then so be it.
Awash as we all are in the constant flood of economic data and opinion, it is worthwhile to remember that we do not invest in the macroeconomy. Your portfolios are driven largely by the ownership of what we believe to be enduringly successful companies – businesses that are even now refining their strategies opportunistically to meet the needs and wants of an eight-billion-person world.
Looking Ahead
In August 2022, Frank Hujsa achieved the Chartered Life Underwriter or CLU® designation from the American College of Financial Planning. The CLU® an advanced body of knowledge of life insurance law, planning, policy design, and application and will enhance Acadium's ability to execute complex estate and business succession plans. Frank is excited to have passed the exam and is already looking forward to the next direction in which to deepen his skill as an advisor.
In February 2023, Lindsey Hansen will be celebrating his 30th year in the financial industry, the pearl anniversary of choosing a career in capital markets over one on the golf course. US equity markets are nearly ten times more valuable now than they were that month in 1993, with the S&P500 at 440 points and the DJIA at 3322. Even this does not compare to the multiple that Lindsey has delivered into the lives of his clients and his colleagues over three decades.
This year, Lindsey will be working towards completing the Certified Investment Management Analyst® or CIMA® designation. This will demonstrate a deep knowledge and interest surrounding investments, portfolio management, behavioral finance, and economics. CIMA® certification is the peak international, technical portfolio construction program for financial advisors and wealth management professionals.
Camala Brown departed the Acadium Team in October to focus on managing her family business in storm recovery from Hurricane Ian. The catastrophic damage from Ian was (literally) not on anyone's radar, but Cam's roofing/demolition business is well poised to help Southwest Florida recover. The Acadium Team thanks Cam for her effort and creativity. We wish Camala and the Brown family success in the new year as they work to help our neighbors rebuild.
Acadium is thrilled to welcome Marcus Arakelian as our registered branch associate and Client Services Coordinator. Marcus brings five years of industry experience and has interacted with clients and advisors both as support staff and as a Raymond James technology consultant. Marcus is extremely knowledgeable, talented, and responsive and we are lucky to have him on our team. Marcus works with Dawna DuClau, who will continue as our invaluable Paraplanner and FPQP®.
After years of planning, Dawna's husband Billy launched his own business in Stuart, FL – Jenkins Property Management and Site Services - just in time to capitalize on the rebuilding from Hurricane Ian. As many of you know firsthand, starting a business is not for the faint of heart. We are rooting for Billy and Dawna and cannot wait to see their future success.
Tom, Frank, and Lindsey are excited about creating more video content this year. Our Roundtable videos have been well received so far, and we are getting better at navigating the regulatory and technological requirements to branch out. It has taken some time for us to be comfortable creating content that meets our production standards while still being timely. We are looking forward to having guests and subject matter experts join us to provide critical insight and added value to our clients.
As we reflect on the storms that we have seen pass and prepare for the ones that will inevitably come, Tom, Lindsey and Frank are continually reminded to be grateful for all the good times and good things in our lives. That begins with you, our clients, who have placed your trust in us and made our lives possible. We always say it but can never say it enough: Thank you for being our clients. It is a genuine privilege to serve you.
Frank Hujsa, CFP®, CLU®
Partner, Acadium Financial Partners
27499 Riverview Center Blvd, Suite 108
Bonita Springs, FL 34134
Lindsey Hansen, CFP®
Partner, Acadium Financial Partners
3601 PGA Blvd, Suite 301
Palm Beach Gardens, FL 33410
Thomas Udovich, CFP®
Partner, Acadium Financial Partners
3601 PGA Blvd, Suite 301
Palm Beach Gardens, FL 33410
Any opinions are those of Frank Hujsa, Lindsey Hansen, and Thomas Udovich are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. member FINRA/SIPC. Acadium Financial Partners is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc.
Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Past performance is not a guarantee of future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as "The Dow" is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.