Second Half of 2022
As expected, and written in the most recent Ken’s Korner, value stocks have outperformed growth stocks. While we were not surprised that the first half was down, we were surprised by the magnitude. Last year we forecasted a rise in inflation and that it would persist for some time and that has proven correct. However, the drops in the major indices through June 30th were more severe than we thought.
In this current downturn we are ever more emboldened that value stocks, especially those with higher yields, will outperform the next several years. Income, in our view, is going to become much more important to overall returns. Over the past 100 years income (dividends) has been approximately 40% of the market’s total return. With interest rates so low the past 20 years, dividends have added much less to overall returns over this time period. We think that changes.
The baby boomer generation is large and their investment needs have changed. This group of investors are more focused on the income they can generate from their investments over how fast it can grow. This leads us to believe income producing assets will outperform. Structure notes have been a recent focus in our practice and work well in the current environment, in our opinion. For clients holding individual stocks, our covered call strategies have generated income as well as modest downside protection during this difficult market. My video explaining the strategy can be found under the “Individuals” tab on the home page.
Looking forward, we think the volatility persists and the market makes little progress in the short-term. We also believe that it is likely we made the lows for this cycle at the end of June. We’re cautious shortterm and are reducing risk modestly and increasing value and income investments for most clients.
We want to thank our valued clients for their continued trust and confidence and look forward to helping them reach their specific needs and goals.
Best regards,
Ken
Any opinions are those of Kenneth M. Lampos and not necessarily those of Raymond James. 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. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the forgoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility
