A Plan for the Future: Mid-Year Market Synopsis and Legacy Planning

Market valuations have come down substantially (even more under the main index numbers) and despite making what we believe is the right call, defensive positioning has not worked as well as hoped YTD. The way to handle uncertainty is to remain disciplined and focus on what we can control.
What Investors CAN Control

This year has seen a number of market changes that understandably make investors nervous. Is a bear market emerging? Are we headed for a recession? In uncertain times, it’s best to focus on the things you can control while also taking a long view: Time marches on, and what happened recently may not continue to happen. Defensive positioning has worked well for CWM and our clients in the past, though not as well so far in the 2022 experience.

This calls back to one of CWM’s core investment philosophies: It’s more important to limit large losses than to capture all potential gains because the bigger the loss, the more exponentially difficult it is to recover.


In our most recent Thirdly, we addressed a handful of issues on our clients’ minds, and also highlighted some aspects of long-term planning that some may not yet have prioritized.

Prospect of a bear market

A bear market, defined as a decline of 20% or more (your CWM team would further define it as a decline over a year or longer), can be difficult for many investors. It’s a time to be patient, which can be daunting. It’s also a time to take advantage of the historic relative safety of bonds, which typically do well during recessionary periods that often accompany bear markets. Determining which actions to take will depend on where you are in your investment journey. If you’re in the accumulation phase, often your best bet is to stay the course. Buy low(er) and reinvest, knowing that time is on your side. For clients in retirement, preservation matters more. Work with your advisor to take steps to minimize portfolio risk and maintain your lifestyle goals.

In response to market downturns, CWM has taken a defensive approach with our models. For our risk-adjusted model, downside protection is prioritized. We’ve also been increasing risk exposure as markets have become less expensive and have sought risk-off assets with higher yields that will provide a higher amount of regular income to the portfolio. Income plus principal return can provide a nice total return when packaged together. The key here is to remain disciplined and seek reasonable risk-taking opportunities, despite uncertainty.

Making sense of the real estate market

In 2022, home prices are rising faster than incomes. And even though mortgage rates have doubled, we’re still near an all-time low in terms of borrowing interest rates. These fluctuations likely won’t kill buying activity, but they will likely slow the housing market and even put downward pressure on home prices. Don’t expect home values to keep increasing at the rate they have been – but don’t expect them to go down significantly either as low vacancy rates leave little available supply for purchasing demand. Most likely, home prices will stabilize, and buyers may find less competition when making a purchase with homes selling closer to listing price than significantly over the asking price.

We’re also seeing an incredibly low housing supply combined with new development slowing as well. Many people are taking their time building and buying new homes – and as values continue to stabilize, it may be in their favor to wait.

Concerning inflation

High consumer spending, massive supply chain disruptions, and increased cost of materials have all contributed to inflation. We believe inflation has peaked or will peak soon, which should reduce pressure for further fed rate hikes in the future. It’s also important to note that we’re seeing a larger inflationary component emerging from the service economy, where prices tend to be stickier (i.e. are unlikely to correct back down), no matter what the central banks do.

We’re also seeing the possibility of an earnings recession, where the cost of living goes up but income remains static. We’ve seen this as recently as 2015, and while the market did take a dip, it didn’t crash.

The savings rate, which spiked with stimulus checks, has come down again, indicating that high consumer spending may be drying up.

All this means that we’re in a potentially dangerous “stagflation” scenario: High inflation combined with dropping GDP and economic activity. Historically, this environment produces the lowest stock returns and the highest volatility.

A plan for the future

Making smart investment decisions and maintaining discipline during uncertain times is the best way to protect your investments and stay on track toward your lifestyle goals. But there are other steps to take as well, even though they’re not always pleasant to think about today: the potential need for custodial care and making sure your estate documents are in order and accessible to those who will need to act on them.

  • 70% of people age 65 and older will need long-term custodial care in their lifetime – and 20% of those individuals will need it for more than five years. There are several ways to address this eventual need. You can purchase long-term care insurance, essentially transferring that risk. You can choose a traditional policy, a hybrid-life policy, or an asset-based policy. Or you can self-insure against the risk, selling off assets to pay for long-term care in the event you need it. Long-term care is the gift you give your family while allowing greater options for yourself when the time comes.*
  • Are your estate documents in order? Does the executor of your will know where to find the original copy of your will? Do they know who to contact if they need assistance settling your estate? Have you made your wishes known regarding burial, cremation, or the kind of memorial service you’d want? It’s not fun to think about, but you want to make it easy and straightforward for your loved ones to access and understand your wishes. Documents to prioritize are your will, medical power of attorney, general power of attorney, and living will.
  • Consider an online, subscription-based password manager. With all of our most important assets and accounts protected by passwords, it’s important to keep your passwords secure, as well as ensure that when your executor needs access, they can get it. A password manager – ideally one that you pay for, as the quality tends to be higher – can accomplish both of these goals. (See VIDEO: How to Protect Yourself from Cyber-Security Threats)

Hold steady and play smart

So many things in this world are out of our control. The best way to manage all this uncertainty is to understand and control the factors we can: Our risk, our cost, our timing, and our behavior. Remain disciplined in the face of volatility, position yourself as best you can, and rest assured that CWM will work to manage and mitigate risk wherever possible.

If you’re interested in speaking with a member of our CWM team about the one constant we can always count on – change – and how it may affect your portfolio and long-term goals, please reach out to us. We’re always happy to help at Comprehensive Wealth Management, LLC.


*Insurance is a product of the insurance industry. Guarantees are subject to the claims-paying ability of the insurance company and surrender charges may apply if money is withdrawn before the end of the contract. Please keep in mind Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable.

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