Market Commentary – Q3 2023

Scaling the Wall of Worry

There is an old saying on Wall Street that markets tend to climb a wall of worry. In times of deep pessimism, the wall seems insurmountable. When the wall is at its maximum height
and fear is rampant, the stock market suddenly turns up in anticipation of better times ahead, confounding most observers. This is the period when most investors and “market experts” are disbelievers and still focused on the negative. It is also the period when many of the forecasts turn out wrong. The famous strategist William O’Neil once said, “I never pay attention to the parade of experts voicing their personal opinions on the market. It just creates entirely too much confusion and can cost you a great deal of money.” Sound advice in our view.

Let’s review the recent market action:

• After declining sharply for most of 2022, the S&P 500 ended the year at 3,840,
  down 18.11% for the calendar year.


• As the year turned, it seemed as if the economy might well be in a no-win situation. Either the Federal Reserve would tighten credit conditions enough to stamp out inflation, plunging us into recession; or it would relent, avoiding a recession but permitting inflation to burn on. In either case, we were assured that corporate
  earnings would decline significantly, boding ill for the stock market.


• Adding to this wall of worry during the first half of 2023, three new and potentially critical uncertainties: the specter of U.S. sovereign default, a wave of bank failures that seemed to threaten the banking system itself, and a renewed outbreak of fear surrounding the dollar’s status as the world’s reserve currency.


• Yet, after enduring that relentless onslaught of crises, real and imagined, the S&P 500 closed out the first half of 2023 up 16%, its best first half since 2019. It’s almost tempting to say “you read that right” and let you draw your own conclusions. Instead, we’ll just repeat Peter Lynch’s timeless advice: “The key to making money in stocks is not to get scared out of them.”

• We seek to be long-term, goal-focused, research- and planning-driven owners of broadly diversified portfolios of enduringly successful companies. As such, we act continuously on our plan, as opposed to reacting episodically to current events and conditions.


• We’re convinced that the economy cannot be consistently forecast, nor the market consistently timed. We infer from this that our best chance to capture something
  close to the full long-term return of equities is to ride out their frequent, sometimes significant, but historically always temporary declines.

Glen J. Ness, AIF®, CFP®	Heather O’Hanlon
Senior Vice President/Investments Portfolio Manager – Solutions Program	Registered Client Service Associate