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Hope all is well with you.  Happy Father’s Day to all of the fathers and happy Juneteenth. The major U.S. stock indexes fell around 5% to 6% for the second week in a row, with the S&P 500 and the NASDAQ posting the tenth negative weekly results out of the past eleven. Those two indexes retreated to levels last seen in late 2020; the Dow closed below 30,000 for the first time since January 2021.   Today is also the anniversary of James Gandolfini’s passing, I have broken down this week’s market analysis with some fatherly advice from Tony Soprano.

It’s good to be in something from the ground floor. I came too late for that and I know. But lately, I’m getting the feeling that I came in at the end. The best is over.

— Tony Soprano

The bull run that started in the spring of 2020 has come to an end. A 3.9% sell-off on Monday pushed the S&P 500 into a bear market, as the index’s decline from a record high achieved on January 3, 2022, exceeded 20.0%. The NASDAQ has been in a bear market since March, while the Dow on Friday was just shy of a bear, as it was 18.7% below a record set in January. Panic and fear persist during bear markets. It can make you abandon your strategy. However, staying invested means you will be at the ground floor of the next bull market. The risk of missing the initial rebound can be even more crippling than the bear market itself.   Both the stock and bond markets have already priced in a recession.  That sounds terrible but the reality is the elements of a recession are not present yet. If a downturn does not materialize, then stocks may not drop much more than they have already.  The stock and bond markets have moved significantly faster in front-running the Fed than in the past and it’s possible that initial bounce could be coming sooner than many analysts are expecting.

If you can quote the rules, then you can obey them.

— Tony Soprano

We all know the rule: buy low, sell high. The worst thing to do is sell when the market is down significantly. It may not get worse, but it is also probably not going to get better for a couple months. The Federal Reserve is committed to raising rates and fighting inflation and will continue to do that. It will take several months of moderating inflation before the markets can really rebound. Just because it is not a good time to move out of stocks, doesn’t mean you should just sit on your hands. It is a great time to look at where you own your stocks. One strategy that could make sense with the market bouncing around the bottom is moving stock investments from pre-tax retirement accounts into Roth. The benefit is when the market comes back up which it eventually will and all the gains you make off the bottom would be tax free.

Sometimes it's important to give people the illusion of being in control.

— Tony Soprano

The markets bounced on Wednesday after Fed Chair Jerome Powell’s post meeting remarks. The 0.75% rate increase that the U.S. Federal Reserve approved the biggest hike since 1994 and left the Fed funds target rate at a range of 1.50% to 1.75%. Chair Powell said that the Fed may slow the pace of rate increases in September if economic growth slows too much.  Powell spoke with confidence and felt he could get inflation down to the 5% range by the end of the year without sending the economy into a tailspin. It seems the Fed gets it.  However, at this moment it is still the illusion of control.  The markets will need to see inflation start to drop before they give the Fed the benefit of the doubt.

My calendar link is below.   If you haven’t done so I encourage you to schedule a review.