Hi Do, Here are Todd’s latest fun picks to take your financial skills to the next level... It's about time, eh?
I told you almost a year and half ago that the investment epoch changed.
I then spent all of 2022 pounding the table with educational resources and an investment solution that you could immediately put to use.
Well, 2022 is now history so how did my forecast work out? - Stocks and bonds declined together, which is rare.
- U.S. stocks were down 18.11%, which was the 7th worst year on record, but less than I expected given interest rate increases.
- U.S. 10 years bonds were down 16.97%, and 30 year treasuries delivered the worst year on record.
- A conventional 60/40 portfolio declined 17.65%, making 2022 the third worst performance in over 100 years.
While that is only one year of results, and my epochal regime change call is for 10-15 years of extensive volatility with no net gains for passive investors, I think 2022 met expectations.
It has now been two months since I last wrote you, and readers have been asking for my 2023 forecast.
Well, I'm going to disappoint you. I don't have a 2023 forecast.
I usually don't make forecasts. It's a fool's errand.
But the end of 2021 marked one of those key turning points that only occur a few times in your lifetime. I've lived through two before, and this is the third. Each changes the entire investment game.
So I pounded the table hard during 2022 with tons of updates and educational resources to bring as many of you along with me as possible. Hopefully, you took action.
2023 is far less certain, but here's what we know: - Inflation is embedded in any growth scenario for likely a decade or longer because of structural limits to energy production, geopolitical changes, on-shoring, and demographics. The implication is that each growth phase in the foreseeable future will get capped because of consequent inflation.
- Zero percent interest rates and record stock market valuations are behind us, thus defining the upper bound as also behind us (which is still not that far away despite last year's decline).
- High interest rates are unsustainable because government debt levels would spiral out of control. That means interest rates can't stay high - particularly real interest rates - or government liabilities will grow at an unsustainable rate.
- The financial leverage built into the system from prolonged, artificially low interest rates created underlying instability and increased the risk of something important breaking. We don't know what will break, or when, but we do know it will happen.
- And we know that every time something major breaks, central banks will rush to the rescue with liquidity resulting in a temporary, cyclical bull market.
- But the cyclical bull can only be temporary because the structural changes cited earlier cap any temporary rise.
- In summary, the next 10-15 years will be a macro-driven roller-coaster with sharp cyclical rises and even sharper declines as things break, inflation surprises, and governments respond, but the upper boundary is already defined, and the lower boundary is anxiously waiting to be discovered.
What that means is uncertainty is the path forward. That's my forecast for 2023, and beyond.
Uncertainty.
Welcome to the next 10-15 years.
Now that we know what to expect, the only thing remaining is to figure out how to navigate this volatile path of uncertainty.
The only investment strategy that I'm aware of that can convert all of that uncertainty into financial security is tactical asset allocation. I provided independent third-party research last year proving why that was true (not just Todd's opinion, but provably true), and my recommended do-it-yourself resource is here to make it paint-by-numbers easy for you to implement.
Hopefully you took action last year and are doing well. For everyone else, the link is here. Better late than never.
You can follow the old passive investing playbook and hope I'm wrong with my "epochal change" call, but given the 2022 results subsequent to making that call, betting I'm wrong probably isn't very smart.
In addition, big-name experts are now finally joining the chorus publicly making the same call I made a year and half ago (see the linked resources below). If you didn't trust me back then, maybe you'll trust the biggest names in the investment management business now.
So, I've said what I had to say last year. I sent you newsletters almost every week packed with independent, third-party educational resources.
You got advance warning before the epoch changed, and you got a year of educational resources explaining the whole thing as it gathered steam.
Good enough. I did my job. Forewarned is forearmed. I can only educate, but I can't force you to take action.
Going forward, I don't expect much to change from what I shared above. The markets will fluctuate, sometimes violently, but the structural change that forced a new economic regime is firmly entrenched now. The path forward for the next decade is clear. That means you can expect fewer newsletters from me this year.
Each newsletter takes hours of work to complete, and I've got some big writing projects to prioritize for my Expectancy Wealth Planning master course and for the Allocate Smartly education series.
I'm hoping to publish one newsletter per month this year when I have 2-3 really great educational resources to bring to your attention (like today's issue).
Beyond that, if you want to work closely with me on growing your wealth then my Expectancy Wealth Planning master course and coaching program is here, and your investment solution for epochal change is here. Those are the two solutions you need to prosper for the next 10-15 years.
I hope you enjoy this month's resources (below) because the biggest names in the investment business are now finally declaring epochal change.
Better late than never... Sea Change - Howard Marks from Oaktree Capital The great Howard Marks needs no introduction. He could sit at the table with Warren Buffett as one of the greatest bond investors of all time. His periodic memos to investors are a media favorite. You'll be stunned how his latest memo so closely mimics my 2022 newsletters that it's humbling. I called it "epochal change" and he calls it "sea change," but that's a distinction without difference. His conclusion reads, "...if you grant that the environment is and may continue to be very different from what it was over the last 13 years - and most of the last 40 years - it should follow that the investment strategies that worked best over those periods may not be the ones that outperform in the years ahead." I'm truly honored that Howard Marks sees almost the exact same thing that I've been telling you about for the past year and a half. Deep respect. This is my favorite resource this month. This article is brief, and it does a decent job of explaining the structural components to inflation that make the Fed's 2% target unlikely over the intermediate term, and without substantial pain. That's super-important to understand. The concluding quote is worth repeating, "I think you occasionally get a turning of the investment and economic age,” he told Fortune last month, “and we’re at one of those now after over a decade of near-zero interest rates.” Yep, he's telling you the investment epoch, or regime, changed. Sound familiar? 2023 A New Investment Playbook (see note below for link) - Blackrock (Ed. Note: Blackrock appears to not allow outside links. You'll have to copy paste this text https://www.blackrock.com/us/individual/insights/blackrock-investment-institute into your browser and then click on the investment playbook title on that page. Alternatively, you can search for the title in Google. Sorry.) Blackrock is one of the biggest names in investment management. The following quotes from their 2023 investment outlook speak for themselves. "A new regime of greater macro and market volatility is playing out." "We don't see the sustained bull markets of the past. That's why a new investment playbook is needed." "We think long-term government bonds won't play their traditional role as portfolio diversifiers due to persistent inflation." "Bottom line: The new regime requires a new investment playbook." Hmmm, Blackrock is now singing the epochal change song. Have you taken action yet on my recommended turn-key, step-by-step investment solution for profiting from epochal change right here? (Ed Note: You may have to click through the "research" link in the footer then scroll the research page to find the title above. Sorry, their web site reroutes direct links to internal pages. #sucks) This white paper explains historically proven investment strategy for the current environment. "...trend following strategies have generally posted very strong returns (consistent with what we've documented in previous market drawdowns and crises). Looking ahead, many of the macro conditions that have been advantageous to trend-following are still in place - and have historically tended to persist." Yep, exactly what I've been saying for a year and half, and will likely continue as true for another 10-15 years. My recommended done-for-you resource to implement trend following risk management in your portfolio is here.
Onward and upward!
Todd Tresidder
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