Broker Check

May 2022 Investylitics

Horizon Advisor Network Investment Committee May 16, 2022

Executive Summary

  • Ongoing fears around higher inflation, continued supply chain constraints, along with continued geopolitical uncertainty due to Russia’s invasion of Ukraine led to significant downturns in both stocks and bonds over the last month.
  • While various US stock market indices show YTD declines of -15% to -25%, the damage looks considerably worse under the hood, as underlying breadth measures have fallen more than this.
  • Over the last 40 years, bonds have typically provided a ballast to help offset stock market volatility. However, with the Federal Reserve Bank poised to raise interest rates aggressively this year, we have seen a historic drop in bond prices as well.
  • Certain areas of the economy, especially the job market, continue to look strong. While unemployment is a lagging economic indicator, there are currently nearly two jobs available for every person looking for work.
  • The committee wants to remind our clients that dips in the market,  while painful, are temporary and oftentimes present buying opportunities for long-term investors. 

The Investment Committee of Horizon Advisor Network met on the afternoon of Monday, May 16th, amid ongoing economic and geopolitical uncertainty. Given the significant volatility that we have seen in both the stock and bond markets globally this year, we are pleased to see that the model portfolios managed by the committee are performing in line with their risk-adjusted, index-based benchmarks over the last one, three and five years. 

We have now seen a third wave of selling in global stock markets this year. This has been driven primarily by fears of the Federal Reserve Bank tightening economic conditions aggressively by both raising short term interest rates and reducing the size of their balance sheet. These dual actions are meant to combat persistent and rising inflation pressures. There is some talk that inflation may be peaking. We will have to see if rising gasoline prices, wages, and housing prices will continue to put upward pressure on these numbers. We are also aware that year-over-year comparisons (base effects) will offset some of these increases.

Ongoing supply chain issues have added to short-term volatility and inflation fears. New rounds of Covid shutdowns in the Shanghai area of China, as well as Russia’s invasion of Ukraine, have exacerbated this. China does not have an mRNA vaccine, and due to zero Covid policy and previous shutdowns, the Chinese population largely lacks herd immunity. Therefore, lockdowns are being enforced in draconian and dramatic ways according to both news reports and anecdotal evidence. It has been reported that within the last 30 days that one out of every six cargo ships in the world was sitting outside the Shanghai ports waiting to either load or unload manufactured goods. This will likely continue to put pressures on supply chain and prices for the several more months. 

All of this has caused significant downturns in global stock indices. The benchmark S&P 500 index is down approximately 15% YTD, while broader measures such as the NASDAQ composite index, which includes many technology stocks, and the Russell 2000 index of small-cap stocks are firmly in bear market territory, off -20% to -25%. As you can see in the chart below, the average stock within these indices is actually down significantly more than this, adding to the challenge that mutual fund and money managers are facing.

Source: Charles Schwab, Bloomberg, as of 4/29/2022. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.

The bond market has also provided no reprieve. Over the last 30 years, the typical pattern during times of economic volatility and dislocation has been for the Fed to reduce interest rates to help support the economic activity. This has typically resulted in bond prices rising during stock market sell offs. This has reversed this year as the Fed has taken the dual actions of both raising short term interest rates and selling bonds on their balance sheets simultaneously. All of this is meant to help bring down inflation, which the Fed finally admitted is not transitory. This has resulted in the worst bond market selloff in recent memory, as you can see in the chart below. Bond markets are off more than 10% meaning that there has been no place to seek reprieve in a typical 60% stock, 40% bond portfolio.

Continuing strength in both the jobs and the housing markets is giving the Fed cover to pursue these aggressive policies. The economy produced 428,000 new jobs in April and the unemployment rate remained unchanged at 3.6%, just above its pre-pandemic 50 year low. Separately, the JOLTS report showed that there were more than 11.5 million jobs available with less than 7 million workers seeking jobs. This imbalance is creating upward pressure on wages. Even though mortgage rates are rising, and home affordability is continuing to decline, low inventory levels of available US homes is keeping housing prices elevated. These are both contributing to the inflation mix.

During times like this, it is important to remember that much of the damage and bad news has already been priced into the markets. While we do not know where the bottom is, we know that selling after markets have dropped, and missing the subsequent rebound that has historically followed, is not a prescription for success. We know that it feels bad to look at account values during times such as this. However, acting on these feelings is often the worst thing you can do.

Warren Buffett has previously reminded us that doing nothing, when it is the right thing to do, is one of the hardest things for a successful long-term investor to implement. When it comes to who we want to emulate, we would much rather follow the pattern of Warren Buffett than the talking heads shouting about volatility and the next end of the world in the financial media. We know from recent filings that Mr. Buffett is using this downturn to go on a shopping spree, as he is using some of his available cash to buy shares at lower prices.

Your portfolio has been constructed to help you achieve your long-term financial goals. Your financial planning goals should remain your true north and should guide your actions, not the daily headlines touted in the media. If your goals have not changed, we encourage you to stay the course. As a reminder, this is now the seventh double digit downturn that we have seen in US stock markets just since the beginning of 2010. Volatility is common and is to be expected, although we know that it is never fun.

As always, please feel free to reach out to your advisor if you have specific questions about your family‘s financial situation. The committee appreciates your continued trust and support as we try to navigate this economic and investment landscape for you, our trusted friends and clients. 

The views stated are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.


Jesse Hurst - Chair, Impel Wealth Management

Nathan Ollish - Impel Wealth Management

Clint Gautreau, Horizon Financial Group

Kevin Myers, ATL Global

Joy Schlie, FHT Financial Advisors

Dusty Green, Spencer Financial Inc.


Jesse W. Hurst, CFP®, AIF®
Financial Advisor

*Award Recipient Jesse Hurst 

*The 2021 ranking of the Forbes’ Best–in–State Wealth Advisors1 list was developed by SHOOK Research and is based on in–person and telephone due–diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, approximately 32,725 advisors were considered, and 5,000 (approximately 15.3 percent of candidates) were recognized. The full methodology2 that Forbes developed in partnership with SHOOK Research is available at

1 This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

2 Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.