Market commentators are filling the airwaves with talk of interest Rate increases, Recession risk & Russia. The three RRR's you might say.
Yes, these talking points are scary if you are a short-term stock trader or have your portfolio run by computer-based momentum models. We prefer to keep our eye on the long-term earnings growth & the financial stability of the high-quality companies we invest in. Let's not be blind to the short-term risks but be crystal clear of the long-term opportunities the current sell-off provides. A look back in history reminds us that after big market drawdowns stock returns are very rewarding. See the attached graph of the S&P 500 stock index back to 1987 including six highlighted bear markets and the resulting up move after the trough.
Short-term risks including "RRR", mid-term elections, energy prices, supply shortages, and inflation need to be put into perspective. Then we can develop appropriate metrics to analyze companies with. These would include but not be limited to what company managements are saying about short-term & long-term trends as they relate to ' earnings, cash flow, dividends & stock buybacks.
For us, it's all about being patient and opportunistic. The latter point is just as important as the former as stock purchases made during bear markets in many cases turn out to be very profitable over the long run.
As always we thank you for your continued confidence and do reach out to us if you have any questions, comments, or concerns.