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  • Writer's pictureRobert Baharian

Economic Gratitude

I'm writing this note as we edge closer towards the holiday season. And of course, as we are every year, we're shocked as to how quickly the year has flown by. I find this interesting in our species. The calendar doesn't change each year. December comes around at the same time, every year, as sure as the sun rises each morning. Yet, we are shocked.


Equally as shocked as we face bear markets. We know they're going to happen, we know they last on average 14 months, we know markets fall by around 35%, we know markets recover from them, and we know they go on to make higher highs over time. These are not my opinions, rather, fact. Yet most investors act like the world is going to end and stocks and other risky assets are going to zero. These could be facts, but probably more my opinion.


As I reflect on the year gone, I thought I would put together a list of things I'm grateful for (and not so grateful for). Investors have been offered plenty of doom and gloom during 2022: high inflation, the fastest rsate increase in decades, swooning markets and widespread recession fears, so I'll try and not be so grinch. Let's get the not so grateful out of the way first.


Not So Grateful That...

  1. The stock market plunged -35%. Each time we've seen the stock market decline with such magnitude, the US economy was either in a recession or on the verge of one.

  2. Financial conditions have tightened the fastest since the GFC.

  3. Diesel prices topping $2.40 per litre.

  4. A slowdown in the global economy is pushing down demand for commodities and manufactured goods.

  5. Business and consumer surverys show a weakening outlook for everything.

  6. Mortgage rates have skyrocketed causing loan applications to fall off a cliff and property prices to fall.

  7. Technology companies are laying off staff as their stock prices collapse and rates rise.

  8. The US Federal Reserve has hiked rates by the most over a six month period since 1981, and some officials say that "we're not even close" to stopping and dismissed Octobers CPI as "one data point".

  9. The four largest companies in the S&P 500 - Apple, Microsoft , Alphabet, and Amazon are down an average of 29.4% year to date (on a total return basis), shedding a total of $2.6 trillion in combined market cap.

  10. Crypto has spun completely out of control - Shhh...don't tell me wife.

Both in life, and in financial markets, there are so many things we cannot control. The above list includes 10 of those things. What we can control is the lens we use to look through to these uncontrolable events and outcomes. We can see all the negative that comes with them, or we can see the positive. We can see the glass half empty, or glass half full so to speak. And so here's what I'm thankful for.


Thankful That...

  1. Following prior periods where stocks declined between 30% and 40% in a 12-month period, its average return over the next year was a gain of +18% with positive returns 73% of the time.

  2. We've recently seen financial conditions easing at one of the fastest pacs on record. Following such extreme moves where conditions eased by a similar amount, equities were higher a year later every time.

  3. Buying a Tesla Y will no longer require fossil fuels and will be charged using the solar panels of my roof. So long petrol stations!

  4. Suppy chains are unsnarling and bottlenecks are over. Retailers now have the opposite problem, excess inventory. Which should result in better deals for consumers and take the pressue off prices.

  5. Businesses and consumers continue to remain resilient (notwithstanding their survey responses - watch what they do not what they say).

  6. Forward interest rates seem to have peaked and retreated have been retreating since mid October. The war on savers is also over - savers can get a decent return on their savings. Property is far more affordable now than they were in the past.

  7. Other areas of the market (outside of technology) remain solid. Technology stocks make up 24% of the US stock market, yet make up around 2% of the entire US workfoce.

  8. Central banks have a terribler track record of predicting the future - just look at the RBA. So based on this, their inflation forecast is more likely to be wrong than right.

  9. The rest of the stocks in the S&P 500 are down an average of only 6.4% (including dividends) with more than 100 stocks in the index up over 10% year to date, including nine stocks (all in the Energy sector) that are up over 75%.

  10. Fraudulent aspects of the crypto space are being exposed and shaken out.

Yes I will complain about how Grill'd charged me $2 extra for a slice of pineapple in my burger ($2!). But I will be grateful for the time spent with my family eating burgers and hanging out. Yes I will complain about the cost of travel. But I will cherish memories of the beach, sunshine, and fun - thank you Google. I will complain about the skyrocketing cost of building a new home and how slow it's been. But I am excited to start a new chapter in our lives. There is never a shortage of things to complain about in financial markets and in life. How we look at them, how we respond, how we react, and what we do next are completely in our control. Things could be worse. A lot worse.


2022 has given us an opportunity to reflect on our lives, who we are, what we value, and how we want to live. Years of social pressure and expectations can maybe, just maybe, be discarded in 2023 to give us an opportunity to live the live that makes us truly happy. These are the things we have control over. And it's the one most important aspect of our lives.


This will be my final note for the year. Wishing you all the very best during the holdiay season and a healthy and prosperous 2023. See you in the new year!

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