August 2, 2023

The Broadcast | July 2023

Welcome to the July edition of The Broadcast!

Sutro Tower Above the Fog - Photo by Ian Simmonds

Hello loyal Broadcast readers! I was struck by a bit of inspiration and have written this month's newsletter in a very personal and introspective format. Since I'm not a professional writer I hope I haven't strayed too far from the norm, but hope you find these thoughts to be helpful, informative and even possibly a smidge refreshing from my typical commentary. Without further ado...

As summer comes winding to a close, I am reminded of the old maxim - the days are long, but the years are short. With growing teen and tween children and their associated erratic summer schedules (combined with the sudden realization that I opened Sutro Advisors nearly 5 years ago!) it sure seems like life is zooming by at a breakneck pace.

Perhaps I've also been feeling this way because it seems that the stock market and economy have been on their own erratic journeys over the past few years. Doesn't it seem like yesterday that we were in a global pandemic which caused a precipitous market decline? Oh, how about a war in Ukraine to cool things down? Then came an old foe from the 70's and early 80's - inflation and another inevitable bear market. This was followed by unprecedented rate hikes and Fed tightening. Recently we were worried about the debt ceiling - remember that?

Similar to the "days are long..." aphorism", I've also been recently reminded of some great advice I was given as a young parent. There was a time not so long ago that a big part of my life was spent struggling with the challenges of sleep training or teething or some other now forgotten tribulation that while at the time seemed like life or death, has now been washed away by the passage of time and experience.

The advice I got from many experienced parents back then was that I should try to worry less about the small problems (which would typically solve themselves), focus intently on any big ones and most of all, I should understand that one day in the not so distant future I'd wish I was back bandaging scraped knees and wiping away tears. They then told me something I will never forget. They all told me that I should enjoy each of these moments as much as I could - not only because the time was fleeting, but for the extraordinary bonding opportunities that often accompanied them.

I've done my best to follow that advice both as a parent and as I've recently realized, as your financial advisor. When a crisis arises, I try to remember that all challenges come with opportunities. With investing there is almost always a reason to worry, but then again most of those worries tend to take care of themselves. Small things that may have worried me back when I started my career in 1999 (dot com zombie companies) have been replaced with bigger concerns (systemic risk and inflation!)

Just as when I was a new parent learning about the subtle and not so subtle differences between the need for bandaids or stitches, I've also learned about the subtle and not so subtle differences between events like the Great Financial Crisis and unprecedented Fed rate hikes.

With the passage of time, I've been fortunate enough to realize that a once in a lifetime systemic financial catastrophe is definitely worse than interest rates going parabolic. I've also learned that maximizing your time in the market leads to more success than trying to time it.

While I certainly didn't enjoy the bear markets of 2020 and 2022, I'm sure glad I saw the positives in the market and helped guide you all through those challenges. So far 2023 has had a lot of really good stock market days and though I know the next speed bump lay somewhere ahead of us I know it too will likely pass.

Yes - some challenges are bigger, tougher or harder to navigate than others but so too are the extraordinary accomplishments and opportunities like watching a child's first steps after they've fallen a million times or still being invested in Tech this year even after being written off after a tough 2022.

As I am reminded on an ongoing basis: yes - the days are long and years short, but don't forget to enjoy them both as much as you can and take advantage of all the opportunities they present.

Oh, and definitely don't forget to invest accordingly.

Current Conditions: In July the stock market continued to reward investors with strongly positive returns. Small U.S. stocks joined the party and lead the way returning +5% for the month.

Major Indices July 2023

On the Horizon: While many economists predicted an economic recession in 2023 (one that has thankfully not occured yet) many analysts and talking heads are now focusing on a corporate earnings recession. Interestingly enough, I think most of this particular risk is actually behind us. While earnings have been down in absolute terms over the past 18 or so months, many earning reports have surprised to the upside (i.e. they weren't as bad as anybody thought.)

The big current question is will corporate earnings continue to surprise to the upside and if so, will earnings actually go up over the next few (several) quarters?

I believe the answer to this question is yes, but of course only time will tell. As always, stay tuned.

I hope you enjoyed this version of The Broadcast. If you have any questions, comments or suggestions please send them my way - I always value your feedback!

Until next time, please enjoy the remaining days of summer!