Weekly Client Letter

Buying and holding can lead to significant emotional & investment pain for investors. Market downturns can be a prolonged and painful experience, further intensified when considering inflation. Historically, there have been significant periods known as “lost decades” like 1929, 1968, or 1999 where $1,000 would have shrunk to less than $400 throughout the decade. And […]

Inflation has come off its peak, but recent readings of the Consumer Price Index remain stubbornly high. The Federal Reserve’s current dilemma: keep inflation under control while supporting economic growth. As seen in the grey line, historical patterns warn that cutting interest rates too soon can lead to a resurgence in inflation. The Fed must

Historical patterns show that peaks in household equity exposure have preceded long periods of muted market performance. These stretches of stagnant returns can be seen in the chart below highlighted in rectangles, right after the circles indicating the new high level of household equity exposure. While we can’t predict the future, recognizing these trends can

It can be tempting to invest in the recent best-performing investments being heralded by media. Unfortunately, research demonstrates, that investing in recent top-performing assets leads to less-than-expected outcomes. See the chart below, which illustrates sticking with a disciplined plan has historically outperformed chasing the most recent best-performing investments. Shifting Allocations = Poor Results We believe

Wall Street often advises staying invested, warning that missing the market’s 10 Best Days can significantly reduce your returns. As a tactical risk manager, we would argue, “Yes, but missing the 10 Worst Days increases your returns to 15.70%!” Achieving that may be unrealistic but consider missing BOTH the 10 Worst AND the 10 Best

Despite recent good earnings reports, the S&P 500 has declined below its 50-Day Moving Average level, signaling technical weakness in the market. This divergence between earnings performance and market trends can create opportunities, but also risks. The market may be signaling broader economic concerns or shifts in investor confidence. As always, we are prepared to

The Bloomberg U.S. Aggregate Bond Index, known for its stability and consistency, has seen an unusual uptick in volatility. Before 2020, the Index only had three negative calendar years since its inception. Recently the frequency of negative returns has increased significantly. In fact, the Index is on track to notch its third negative year in

Following a higher-than-expected consumer price index report last Wednesday, the Federal Reserve may reconsider anticipated rate cuts, potentially maintaining higher interest rates for longer than previously expected. This scenario could put pressure on stock market valuations and bond prices. Since the future market direction is unpredictable, we are prepared for any scenario. Our RiskFirst® approach

Stock prices and Federal Reserve interest rate cut expectations were moving together until recently. Now there is a divergence due to a change, in that market participants believe the Federal Reserve might postpone or slow the pace of interest rate reductions, but the stock market has continued up. The question for many is whether the

“Yield-Curve Inversion,” occurs when short-term bond yields surpass those of long-term bonds. This unusual pattern, exceeding over 630 days, marks the longest period of inversion since 1970, highlighting investor concerns about the near-term economic prospects. Historically, these inversions have often preceded economic recessions, though they are not foolproof indicators. At Redwood, we are vigilantly monitoring