Putting the bear to work - Prospero Wealth

Yesterday, June 15th, the Fed did what we expected them to and raised interest rates by .75% (or 75 basis points in econ-speak). This is the largest rate hike in 28 years (since 1994) so you can see the aggression in their intent to curb inflation, which increased to 8.6% in May (yikes!). Right now the benchmark funds rate is at 1.5% to 1.75%. The Fed has indicated that this rate will go to 3.4% by the end of this year, so you can anticipate significant ongoing interest rate hikes throughout the year on the path to that number.

This is the Fed getting out their big whomping stick and making moves to curb inflation, which they predict at 5.2% for FY 2022 and 2.6% in FY 2023. That 2.6% number is interesting because it shows that the Fed is predicting we will be back pretty much in-line with our 2% target for inflation by the end of next year. Whether that’s true is anyone’s guess, but that’s where they see things right now.The markets viewed this move favorably yesterday before changing its tune and falling further today on increasing fears of recession. Clearly, investor behavior is all over the place and volatility is the watch-word for the foreseeable future.

How do we see this at Prospero Wealth?

We view the rate change yesterday as an appropriate recognition of reality by the Fed and are long-term bullish (which is nearly always the case for us) on what it means. The stock market is made up of lots of buyers and sellers, most of whom have much shorter timelines for results than we do. This is why you see people over-react and completely change their irrational minds literally overnight.

While there is significant volatility expected over the coming months, we believe that it will present significant opportunities that we can take advantage of, so that is how we are positioning ourselves in our active strategies. You will likely see us be more active buyers and sellers than normal.

We’ll take what the market gives us and position ourselves for eventual recovery and movement to new highs, because, numerically speaking, that is ALWAYS what happens. Unless you believe that the collapse of capitalism is imminent, just put your headphones on and keep investing. Generally speaking, our advice on where to put new money right now will depend on where your existing money is allocated:

If your overall portfolio has fallen more than the S&P 500 since the beginning of the year, this would indicate that you probably have significant exposure to growth stocks. We would put new assets to work in building out your value-based indexing. In our case, we tend to use Dimensional Funds to achieve this end. Dimesnioanl is the OG in quant-based value indexing. We like them.
If your overall portfolio has fallen less than the S&P 500, this would indicate that you have significant exposure to value stocks (or conservative holdings) already and we would likely increase your allocation to growth (as a percentage) of your portfolio to capture some of the eventual rebound we believe will inevitable come.

Please reach out to us if you have any questions on how we can get new assets to work for you and your own situation. The above is not personalized advice for anyone, just a heuristic we would use to assess where you’re at and how to position properly in most cases as you move forward with your investing.

The important thing is to not stop investing while awaiting for some indication of a rebound. Scared markets are where the money is made over the long term. Just keep on keepin’ on (like you probably do with your 401(k) at work). Today’s prices are tomorrow’s bargains.

Yesterday, June 15th, the Fed did what we expected them to and raised interest rates by .75% (or 75 basis points in econ-speak). This is the largest rate hike in 28 years (since 1994) so you can see the aggression in their intent to curb inflation, which increased to 8.6% in May (yikes!). Right now the benchmark funds rate is at 1.5% to 1.75%. The Fed has indicated that this rate will go to 3.4% by the end of this year, so you can anticipate significant ongoing interest rate hikes throughout the year on the path to that number.

This is the Fed getting out their big whomping stick and making moves to curb inflation, which they predict at 5.2% for FY 2022 and 2.6% in FY 2023. That 2.6% number is interesting because it shows that the Fed is predicting we will be back pretty much in-line with our 2% target for inflation by the end of next year. Whether that’s true is anyone’s guess, but that’s where they see things right now.The markets viewed this move favorably yesterday before changing its tune and falling further today on increasing fears of recession. Clearly, investor behavior is all over the place and volatility is the watch-word for the foreseeable future.

How do we see this at Prospero Wealth?

We view the rate change yesterday as an appropriate recognition of reality by the Fed and are long-term bullish (which is nearly always the case for us) on what it means. The stock market is made up of lots of buyers and sellers, most of whom have much shorter timelines for results than we do. This is why you see people over-react and completely change their irrational minds literally overnight.

While there is significant volatility expected over the coming months, we believe that it will present significant opportunities that we can take advantage of, so that is how we are positioning ourselves in our active strategies. You will likely see us be more active buyers and sellers than normal.

We’ll take what the market gives us and position ourselves for eventual recovery and movement to new highs, because, numerically speaking, that is ALWAYS what happens. Unless you believe that the collapse of capitalism is imminent, just put your headphones on and keep investing. Generally speaking, our advice on where to put new money right now will depend on where your existing money is allocated:

If your overall portfolio has fallen more than the S&P 500 since the beginning of the year, this would indicate that you probably have significant exposure to growth stocks. We would put new assets to work in building out your value-based indexing. In our case, we tend to use Dimensional Funds to achieve this end. Dimesnioanl is the OG in quant-based value indexing. We like them.
If your overall portfolio has fallen less than the S&P 500, this would indicate that you have significant exposure to value stocks (or conservative holdings) already and we would likely increase your allocation to growth (as a percentage) of your portfolio to capture some of the eventual rebound we believe will inevitable come.

Please reach out to us if you have any questions on how we can get new assets to work for you and your own situation. The above is not personalized advice for anyone, just a heuristic we would use to assess where you’re at and how to position properly in most cases as you move forward with your investing.

The important thing is to not stop investing while awaiting for some indication of a rebound. Scared markets are where the money is made over the long term. Just keep on keepin’ on (like you probably do with your 401(k) at work). Today’s prices are tomorrow’s bargains.

Yesterday, June 15th, the Fed did what we expected them to and raised interest rates by .75% (or 75 basis points in econ-speak). This is the largest rate hike in 28 years (since 1994) so you can see the aggression in their intent to curb inflation, which increased to 8.6% in May (yikes!). Right now the benchmark funds rate is at 1.5% to 1.75%. The Fed has indicated that this rate will go to 3.4% by the end of this year, so you can anticipate significant ongoing interest rate hikes throughout the year on the path to that number.

This is the Fed getting out their big whomping stick and making moves to curb inflation, which they predict at 5.2% for FY 2022 and 2.6% in FY 2023. That 2.6% number is interesting because it shows that the Fed is predicting we will be back pretty much in-line with our 2% target for inflation by the end of next year. Whether that’s true is anyone’s guess, but that’s where they see things right now.The markets viewed this move favorably yesterday before changing its tune and falling further today on increasing fears of recession. Clearly, investor behavior is all over the place and volatility is the watch-word for the foreseeable future.

How do we see this at Prospero Wealth?

We view the rate change yesterday as an appropriate recognition of reality by the Fed and are long-term bullish (which is nearly always the case for us) on what it means. The stock market is made up of lots of buyers and sellers, most of whom have much shorter timelines for results than we do. This is why you see people over-react and completely change their irrational minds literally overnight.

While there is significant volatility expected over the coming months, we believe that it will present significant opportunities that we can take advantage of, so that is how we are positioning ourselves in our active strategies. You will likely see us be more active buyers and sellers than normal.

We’ll take what the market gives us and position ourselves for eventual recovery and movement to new highs, because, numerically speaking, that is ALWAYS what happens. Unless you believe that the collapse of capitalism is imminent, just put your headphones on and keep investing. Generally speaking, our advice on where to put new money right now will depend on where your existing money is allocated:

If your overall portfolio has fallen more than the S&P 500 since the beginning of the year, this would indicate that you probably have significant exposure to growth stocks. We would put new assets to work in building out your value-based indexing. In our case, we tend to use Dimensional Funds to achieve this end. Dimesnioanl is the OG in quant-based value indexing. We like them.
If your overall portfolio has fallen less than the S&P 500, this would indicate that you have significant exposure to value stocks (or conservative holdings) already and we would likely increase your allocation to growth (as a percentage) of your portfolio to capture some of the eventual rebound we believe will inevitable come.

Please reach out to us if you have any questions on how we can get new assets to work for you and your own situation. The above is not personalized advice for anyone, just a heuristic we would use to assess where you’re at and how to position properly in most cases as you move forward with your investing.

The important thing is to not stop investing while awaiting for some indication of a rebound. Scared markets are where the money is made over the long term. Just keep on keepin’ on (like you probably do with your 401(k) at work). Today’s prices are tomorrow’s bargains.