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Market & Investment Allocation Update

July 8, 2022

Current Allocation

As you’ve seen in the news, stock and bond markets closed out one of their worst first halves of the year – ever.

Through July 7, 2022, the S&P 500 Index is down -18.12% and the S&P U.S. Aggregate Bond Index is down -9.66%.

One of the fundamental principles of investing is diversification. Diversification is used to smooth out the rough edges of volatile markets. One of the most macro ways to diversify is to have a blended portfolio of stocks and bonds because, as the thinking goes, when one of those zigs, the other should hopefully zag thus smoothing out your investment experience.

Well this year that didn’t work. Generally speaking, if you diversified between stocks and bonds, you got crushed. There were very few places to hide from the carnage with the exception of cash, commodities and energy (with commodities and energy recently suffering significant losses as well). Yes, inflation eats away at the purchasing power of cash but it also serves to exacerbate the negative returns of stock and bond markets.

The fact that we were nimble and flexible this year and responded to what markets were actually doing by working our way out of stocks and bonds to get to a zero weighting in both this year served to greatly reduce the pain many are feeling when they look at their investment account statements. Accounts custodied at TD Ameritrade continue to be 100% in cash.

Looking Forward

Of course anything can happen, but I think before the worst is over, there’s a high probability that we touch 3,400 on the S&P 500 Index. That’s roughly 13% lower than the S&P 500 is right now. Some argue the ultimate low in this market is lower but 3,400 is my best case for the time being.

That being said, the plan for the short-term is to continue to let the market be volatile as it continues to work its way lower (if that happens) and win by not losing – for now.

But – and I’m going to be doing a deeper dive on this in my next letter – we are looking very closely at the time period of August-November this year for things to possibly turn around positively in a meaningful way and give us the opportunity to buy at significantly discounted prices and then make solid forward progress. The biggest variables to that scenario working
out are of course A) does inflation come down? And B) what does the Fed do? More on this next time...

If there is anyone that you care for where we might help with a second opinion or other information, please forward this email so they can reach out to us.

I hope that you’re doing well and welcome any questions that you have.

David W. Shepherd Jr. CFP®

6300 E El Dorado Plaza, Suite A200
Tucson, AZ 85715
Phone: 520-325-1600
Fax: 520-325-9097

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Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Shepherd Wealth &
Retirement LLC ("SWR"), or any non-investment related content, made reference to directly or indirectly in this update will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. To the extent you have questions regarding the information discussed above, your investment adviser representative remains available to assist you.

Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments.

SWR is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of SWR's current written disclosure Brochure discussing our advisory services and fees is available upon request.

Please remember to contact SWR, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. SWR shall continue to rely on the accuracy of information that you have provided.

Forward-looking statements are only predictions. The forward-looking comments discussed in this Update by us, or our representatives, may not occur. Actual events and results may differ materially and are subject to risks, uncertainties and various assumptions.

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