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Another Mid-Cycle “Opportunity”

Understanding the Rhythm of Markets and How to Benefit 


For many who have been long-time clients of Charter Oak, you have heard some of this before.  Economies and markets do not grow in a linear fashion; there are many bumps and edifices along the way. Because humans are involved in investing, and our imperfections are as predictable as an ocean tide, stock return patterns share in our human rhythms. If we look at historical market returns, we see patterns: 2-3 years of positive markets, then a down year, followed by 2-3 years of positive returns and repeat. It is not the perfect rhythm of the Boston Symphony, but it illustrates and reflects human nature, public policy, the business cycle, and laws of nature. (Extra credit – google “reversion to the mean”.)


What does all this philosophical hubbub

mean to you and your investments?

What is Charter Oak doing about the current
challenges “de jour”?


To answer those questions, we will use a common analogy, one that we hope partly demystifies investing and allows you the knowledge to understand, respect, and appreciate the investment markets and how we see and navigate through difficult periods.

You arrive in Florida, your bags packed, your energy high, and aspirations of fun are off the charts; you are about to board a cruise ship for the Caribbean! (Yes, this is a “sailing” analogy.) The sun is shining, you are on your cabin deck, with your favorite drink in hand as the ship slowly heads out to sea. It’s a wonderful feeling. With a full belly, you retire for the evening, and can’t wait for the adventures of tomorrow.  

Suddenly, you are awoken by the ship's movement. It's 3:00 am and, unpredictably, a storm has formed, waves are big, and the ship is getting tossed around. After 2 hours of heavy swaying the captain makes an announcement: “Fellow passengers, unfortunately nature has other plans than a gentle cruise this morning. This storm is not something we haven’t seen before; please don’t be alarmed. The boat you are on was built to handle this storm and more, the captain and crew have decades of experience successfully navigating these storms.  While it may be a bit uncomfortable for the next 4-5 hours, we can see with our instruments, and know from our wisdom, that if we power through this storm there are calm seas and gentle breezes on the other side. This too will pass.”


Investing, planning, and life come with bumps and bruises.   We all know those bumps shape us, often strengthening our resolve.  Here at Charter Oak, we know from our 125+ years of collective experience how to navigate difficult markets and benefit by adjusting your investments, making the right moves to ready ourselves for the next cycle of growth. We do not profess to say that we can shelter you from the storm of negative markets; no one can. We do say that we have been here before, we know what to do, and will be actively doing so until the seas calm.


Many of you have received notices in your inbox/mailbox indicating that actions or trades are being made in your discretionary managed investment accounts on your behalf. That is us here at Charter Oak navigating on your behalf. We are adjusting your fixed income investments as the Federal Reserve continues to raise interest rates to slow down our economy and get inflation in check. We are taking advantage of a downturn in stock prices and adjusting the types of investments that we believe will thrive on the other side of this storm.



 Here is a quick peek at what we see:


We had 17.5% compound annual returns in the S&P 500 from the 2009 low through the end of 2021 – climaxing with 24% annually over the last three calendar years – in some measure because of the Fed’s overstimulation. We are now in the process of giving some of that back as the Fed works to correct is over stimulation.


Meanwhile, a staggering milestone in the finances of the American household was recently reached – to essentially no notice whatsoever. With $2.5 trillion of “excess savings” on its balance sheet, the net debt of the American household has collapsed to zero for the first time in 30 years. That’s right: total household debt minus cash currently equals zero.


When your April statements arrive in your mail or inbox, they will show the signs of a bumpy ride, and the fact that both bonds (the stable part of your investments) and stocks were tossed around in April. We recognize that this is uncomfortable, but please bear with us. Our instruments tell us that on the other side of this volatility we will see growth and profits again.  The journey may take 3-5-7 more months. The timing is not perfect; however, the outcome and your long-term success is our goal, and we will guide you through.


As always, it is a privilege and a pleasure to serve you and know that we are here for you whenever you need us.  Grab your handrail and hang on; it will be a bumpy ride for little longer, but we will guide you and steer your investments to the “other side”.


Happy Spring!