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Understanding the Market Correction – 2023

You probably saw the news: On October 27, the S&P 500 officially slid into a market correction.

A correction is when the markets decline 10% or more from a recent peak.  In the S&P’s case, the “recent peak” was on July 31, when the index topped out at 4,588.1  On Friday, the index closed at 4,117 – a drop of 10.2%.1 

Market corrections are never fun, and there’s no way to know for sure how long one will last.  Historically, the average correction lasts for around four months, with the S&P 500 dipping around 13% before recovering.2 Of course, this is just the average.  Some corrections worsen and turn into bear markets.  Others last barely longer than the time it took for us to write this message.  (On Monday, October 30, for example, the S&P actually rose 1.2% and exited correction territory.3) Either way, corrections are not something to fear, but to understand – so that we can come through it stronger and healthier than before. 

To do that, we must understand why the markets have been sliding since July 31.  We use the word “slide” because that’s exactly what this correction has been.  Not a sharp, sudden drop, but a gradual slide, like the bumpy ones you see on a playground that rise and fall on the way to the ground.   While the S&P 500 dropped “at least 2% in a day on more than 20 occasions” in 2022, that’s only happened once in 2023, all the way back in February.4    

At first glance, it may seem a little puzzling that the markets have been sliding at all.  Do you remember how the markets surged during the first seven months of the year?  When 2023 kicked off, we were still coming to terms with stubborn inflation and rising interest rates.  Many economists predicted higher rates would lead to a recession.  But that didn’t happen.  The economy continued to grow.  The labor market added jobs.  Inflation cooled off.  As a result, many investors got excited, thinking maybe the Federal Reserve would stop hiking rates…or even start bringing rates down. 

Fast forward to today.  The economy continues to be healthy, having grown an impressive 4.9% in the third quarter.5  Inflation is significantly lower than where it was a year ago.  (In October of 2022, the inflation rate was 7.7%; as of this writing, that number is 3.7%.6)  And the unemployment rate is holding steady at 3.8%.7  But the markets move based either on excitement for the future, or fear of it – and these cheery numbers no longer generate the level of excitement they did earlier in the year. 

The reason is there are simply too many storm clouds obscuring the sunshine.  While inflation is much lower than last year, prices have ticked up slightly in recent months.  (We mentioned the inflation rate was 3.7% in September; it was 3.0% in June.6)  As a result, investors are now expecting the Federal Reserve to keep interest rates higher for longer.  Seeking to take advantage of this, many investors have moved over to U.S. Treasury bonds, driving the yield on 10-year bonds to its highest level in 16 years.  Since bonds are often seen as less volatile than stocks, when investors feel they can get a decent return with less volatility, they tend to move money out of the stock market and into the bond market.

As impressive as Q3 was for the economy, there are cloudy skies here, too.  This growth was largely driven by consumer spending – but how long consumers can continue to spend is an open question.  Some economists have noted that Americans’ after-tax income decreased by 1% over the summer, and the savings rate fell from 5.2% to 3.8%, too.5  Mortgage rates are near 8%, a 23-year high.8  Meanwhile, home sales are at a 13-year low.9  All this suggests that the Fed’s rate hikes, while cooling off inflation, have been cooling parts of the economy, too.

Couple all this with violence in the Middle East, political turmoil in Congress, and a potential government shutdown later in November, and you can see the problem.  Despite the strong economy, investors just aren’t seeing a good reason to put more money into the stock market…but lots of reasons to think that taking money out might be the prudent thing to do.  It’s not a market panic; it’s a market malaise.    

So, what does this all mean for us? 

We mentioned how the markets operate based on excitement for the future, or fear of it.  But that’s not how we operate.  We know that, while corrections are common and often temporary, they can worsen into bear markets.  Furthermore, any decline can have a significant impact on your portfolio, and by extension, your financial goals.  So, while our team doesn’t believe in panicking whenever a correction hits, neither do we believe in simply standing still.  Instead, we’ll continue to analyze how both the overall market – and the various sectors within the market – are trending.  We have put in place a series of rules that determine at what point in a trend we decide to buy, and when we decide to sell.  This enables us to switch between offense and defense at any time.  This, we feel, is the best way to keep you moving forward to your financial goals when the roads are good…and the best way to prevent you from backsliding when they’re bad. 

In the meantime, our advice is to enjoy the holiday season!  Our team will continue to focus on investments, so our clients can focus on why they invest: To create happy memories and live life to the fullest with their loved ones.  Happy Holidays! 



1 “S&P 500,” St. Louis Fed,

2 “Correction,” Investopedia,

3 “Stocks rebound to start week,” CNBC,

4 “S&P falls into correction,” Financial Times,

5 “U.S. Economy Grew a Strong 4.9%,” The Wall Street Journal,

6 “United States Inflation Rate,” Trading Economics,

7 “The Employment Situation – September 2023,” U.S. Bureau of Labor Statistics,

8 “30-Year Fixed Rate Mortgage Average,” St. Louis Fed,

9 “America’s frozen housing market,” CNN Business,


Medicare Changes Retirees Need to Know About

New laws are here!

If you have questions about Medicare or would like to learn about the new laws, click here to view the schedule for our upcoming medicare webinars.

The new Inflation Reduction Act is a big enchilada of green energy spending, corporate taxes, and some pretty major changes to Medicare.

Is this deal a big deal? Could be. We’ll wrap it up for you at the end.

First, here are some Medicare changes you might want to know about:1

Medicare will be able to negotiate drug prices (starting in 2026)
For the first time, the Medicare program will have the power to negotiate the cost of (some) drugs.
Before price negotiations kick off, new rules will also force manufacturers to pay “rebates” to the government if they increase covered drug prices higher than general inflation (starting in 2023) and limit Medicare Part D premium increases each year (starting in 2024).1

Why does this matter? Drug price inflation is crazy high, outpacing general inflation for thousands of medications.2

The power to negotiate drug prices with manufacturers could end up lowering costs. For example, a budget study found that Medicare was paying 32% more for the same drugs as Medicaid (which already has the power to negotiate prices).1

Lower prices could lead to overall program savings (and possibly lower Medicare premiums), plus save money for retirees who depend on those specific drugs.

Out-of-pocket drug costs on Part D will be capped at $2,000/year (starting in 2025)
Under current laws, there’s no cap on how much people have to spend out-of-pocket for their medications, which can really add up under cost-sharing requirements.

Starting in 2024, folks who spend enough out-of-pocket on medications to surpass the “catastrophic threshold” will no longer have to pay coinsurance for their expensive drugs.1

And, starting in 2025, the maximum out-of-pocket medicine cost for folks on Part D will be a flat $2,000.

Why does this matter? Many drugs (especially new ones) can be devastatingly expensive.
Capping annual drug costs will hopefully not only save folks money, but also lead to more predictability in their yearly health care costs.

Out-of-pocket insulin costs will be capped at $35/month for Medicare participants (starting in 2023)
Starting in 2023, enrollees won’t have to spend more than $35 per month on their insulin copays.1
Folks on private health insurance won’t see a change.

Why does this matter? As anyone who needs insulin will tell you, it can get pricey, costing over $500 per year on average.3 Much more if you need one of the more expensive versions.
Capping costs could help the millions who need this life-saving medication.

All vaccines will be free under Part D (starting in 2023)
While flu and COVID-19 shots might be covered for many, most vaccines are not.
Starting in 2023, cost-sharing under Part D will end, making ALL covered adult vaccines free.1

Why does this matter? Many adult vaccines can cost quite a few bucks. For example, the shingles vaccine can cost upwards of $150 a pop and other recommended jabs can also be very pricey.4
Making vaccines free could not only lower the financial impact of immunizations, but also increase their availability to lower-income folks.

Will these new laws help retirees?
This is where the future gets hazy. Legal challenges or post-election changes could end up altering much of what’s in the Inflation Reduction Act. And much depends on the actual execution of the new rules.

The new rules could also mean premium changes as insurance companies figure out their models.

Since health care is one of the biggest unknown costs in retirement, lowering drug costs and making spending more predictable for Medicare recipients could absolutely have a positive impact on millions of people.

Will the Inflation Reduction Act help the economy?

Whether the overall bill will live up to its name, lower inflation, and have a net positive impact on the economy also remains to be seen.

Some economists project that the bill will end up modestly reducing inflation and trimming the federal budget over the next decade.5

Others are concerned about the impact of the new corporate tax rules written into the legislation.
As is usually the case, time will tell.

Remember, our medicare webinar is a great opportunity to learn more.  Click here to register now for an upcoming webinar.






Chart source:

Bear Market Update

The S&P 500 has recently slid into a bear market due to inflation and fears of a recession. As expected, the Fed announced a 0.75% interest rate hike.1  That may not sound like much, but it’s the largest single rate increase since 1994. 1  To keep you up to date on what’s going on, let’s do a quick Q&A. 

Q: What, exactly, did the Federal Reserve do?

A: Raise the “Federal Funds Rate”.  This is the interest rate that banks pay each other for overnight loans.  When the rate goes up, it costs more for banks to loan each other money. In response, banks raise their own interest rates. That’s why, when the Federal Reserve raises the federal funds rate, it eventually affects consumers and small businesses whenever they apply for a loan.  Specifically, the Fed raised the rate up 0.75% to approximately 1.6%.1 

Q: How did the markets react?

A: Initially, the markets rose soon after the announcement, as it was expected, and because many experts believe it’s necessary to tamp down on inflation.

The day after, though, the markets continued their slide.  The S&P 500 and NASDAQ are firmly in bear market territory, and the Dow is getting close. 

The reason for this is because the Fed also announced that a second 0.75% rate increase is possible in July.  While higher interest rates are a proven tool for fighting inflation, each rate hike increases the odds of a recession, even if it’s a small one.  The markets dropping further is essentially investors pricing in the likelihood of more action from the Fed…and a greater chance of an economic downturn. 

Q: What is the Fed hoping to achieve here?

A: When the Fed announced the rate hike on Wednesday, they also revealed something else: Their economic outlook for the rest of 2022.  The Fed’s hope is to achieve what’s called a “soft landing.”    This is where economic growth slows, but a full-blown recession is avoided.  There’s some justification for this hope.  After all, if you remove inflation from the equation, the economy is actually in pretty good shape.  The unemployment rate is at 3.6%, which is almost back to where we were in January 2020 before COVID hit.2  And consumer spending – the bedrock of our economy – remains strong.  It was to shore up the economy that the Fed dropped interest rates in the first place.  Now, the thinking goes, that mission is complete, which means it’s time for the Fed to pivot to the second prong of their “dual mandate”: stabilizing prices.  (The first prong is stable employment.)

Unfortunately, soft landings are historically difficult to achieve, and the most recent data suggests an economic slowdown may already be happening.  Consumer sentiment is dropping, retail sales numbers have dropped slightly over the last month, and while the economy continues to add jobs, it did so at a slower pace in May.1  Even the Fed admits that the unemployment rate will likely go up over the next few years.  (Moving from 3.6% to 4.1%, according to their projections.1

Q: So, what should we do moving forward?

A: The main thing right now is to remember that the markets move based on what investors expect to happen, not what is happening right now.  At any point, those expectations could change.  Every new bit of economic data between now and the Fed’s next meeting in July will be carefully scrutinized.  That’s why it’s never a good idea to overreact to the day-to-day swings in the market, even if they seem significant.  The sentiment that drives the market today may be completely different tomorrow. 

Remember: We endured both a bear market and a recession not very long ago.  Keeping the long-term in view helped us not only get through rough times but take advantage of a tremendous recovery. 

Of course, if you have any immediate financial goals, or need access to some of your money in the short-term, let us know and our team will help you promptly.  And of course, if you have any questions or concerns about your portfolio, don’t hesitate to reach out.  That’s what we’re here for!     

As the summer progresses, we’ll keep you apprised about what’s going on in the markets.  In the meantime, enjoy the warmer weather knowing that we are here to do everything we can to keep you working toward your financial goals.      

1 “Fed hikes its benchmark interest rate by 0.75 percentage point, the biggest increase since 1994,” CNBC,,E,X,T&H=46cf2e46f2cc5f68e79a2d364fd4ec5052f5340f

2 “The Employment Situation – May 2022,” Bureau of Labor Statistics,,E,X,T&H=0c145dfe397266fae066dd051f8fdcdbef3da5e2

Turbulent Times 2022

Recently, we overheard two people talking about the NBA playoffs, which are currently underway.  While praising their favorite team’s defensive performance, one of them said something that stuck with us:

“Defense wins championships.”   

What a great line!  Defense wins championships.  The reason this stuck with us is because we’ve been thinking about defense while studying the markets recently. As you probably know, market volatility has been persistent since the middle of January. The S&P 500 has moved in and out of correction territory for the past two months, and the NASDAQ is technically in a bear market. (Quick reminder: A “correction” is defined as a drop of 10% or more from a recent peak, while a “bear market” is a drop of 20% or more.)

As you can imagine, this sustained volatility has a lot of investors concerned for the future.  And make no mistake: it’s clear that we are living in turbulent times right now. Some analysts are warning of a potential bear market across the entire stock market; some economists, meanwhile, are even forecasting the possibility of a new recession.1 (Though it’s worth noting this prediction does not seem to be the prevailing one among most economists.)

No one enjoys investing during times like these.  But as your financial advisors, we decided to write this letter to assure you that we have a major advantage: We don’t have to suffer from turbulent times.  Because we have the ability to play defense with your portfolio.

And defense wins championships. 

Let us explain what we mean by quickly recapping why the markets are so volatile. The various reasons are all interconnected, so we can untangle the knot of events fairly easily.

On Monday, April 25, health authorities in Beijing, China, rushed around the city to conduct as many COVID-19 tests as they possibly could. By the end of the day, they had tested almost 3.7 million people.2 Their goal?  Identify and quarantine every infected person in the vicinity – so they could avoid the city-wide lockdown that nearby Shanghai has been dealing with for the past four weeks. 

The reason this matters is because the world depends on China for a lot of things: Foodstuffs, rare earth metals, computer chips, cars, steel, plastics, etc.  The worry is that if China goes on lockdown again, production on all these items will plummet.  That would throw a major wrench into global supply chains, which are still – still – struggling to recover from the pandemic. 

This is something the world can ill-afford at the moment, especially given the ongoing war in Ukraine.  Much of the world depends on both these countries for the goods they need.  Wheat and neon gas from Ukraine, for example.  Oil and natural gas from Russia.  Thanks to this conflict, and due to the sanctions imposed on Russia as a result of it, it’s now not only more expensive to buy certain items.  It’s more important to ship them, too. 

All these supply chain issues, of course, have contributed to the rampant inflation we’ve seen this year.  For example, take something as simple as chicken eggs.  Russia exports a huge percentage of the components that go into agricultural fertilizer.  When it becomes more expensive for farmers to buy fertilizer, the price of corn goes up.  When the price of corn goes up, the price of chicken feed goes up.  When the price of chicken feed goes up, the price of raising chickens goes up.  That leads to higher-priced eggs, which is further compounded by higher oil prices making it more expensive to ship those eggs to the market and…well, you get the point.

Understanding how the world’s issues, like COVID and war, contributes to supply chain problems makes it easier to see how they also contribute to inflation.  And what does inflation have to do with the stock market?  Simple: Inflation doesn’t just affect consumers.  It affects companies, too.  During periods of high inflation, it becomes more and more costly for companies to produce the products they sell.  They can – and usually do – raise their own prices to compensate, but this can backfire if it leads consumers to go elsewhere.  Either way, the company’s profit margin suffers – which means they return less value to shareholders.  Shareholders, in response, then start selling their stock, driving the price down.  These are the reasons we’ve seen such sustained volatility in the markets – and why that volatility will likely continue for some time. 

These are indeed turbulent times we live in.  But here’s the good news.  If you look closely, nothing we’ve just explained to you is new, is it?  We’ve been dealing with COVID since 2020; with inflation since 2021.  In the last two years, we’ve lived through both a bear market and a recession and come out on the other side.  We’ve been reading about supply chain issues for months; trade issues with China for years.  The sources of today’s volatility are largely the same as yesterday’s. 

Which means we know exactly how to deal with it.

As you know, when COVID first hit, we immediately moved to “play defense” with your portfolio.  We accepted that growing wasn’t the objective anymore – it was preserving capital.  Over the years, we’ve honed our tactics to be able to move to defense whenever the situation demands it.  Our team will continue to monitor the situation, but we’re prepared for the possibility of a bear market.  Would we rather always stay on offense, seeking to find new opportunities to grow?  Of course.  But sometimes, the best way to move forward is to keep yourself from moving backwards.  Sometimes, avoiding market pain is the best possible gain.  Due to our use of technical analysis, and the systematic rules we have in place that let us know when it’s time to buy and when it’s time to sell, defense will be our objective whenever conditions warrant it. 

1 “A major recession is coming, Deutsche Bank warns,” CNN Business,,E,X,T&H=8081c2db199c4424978bc13342bb584b0eaec739

2 “Beijing Orders Citywide Covid-19 Testing,” The Wall Street Journal,,E,X,T&H=a81b7794ae33406bc76baf938642e9b857fd38b4

2021 Areas of Uncertainty -> Volatility

Everyone knows that April showers bring May flowers.  But this year, the saying could be, April tranquility brings May volatility. 

Okay, maybe that saying won’t catch on.  But still: Up one day, down the next, flat overall — this has been the state of the markets for the last few weeks.  The fancy word for this is consolidation.  The markets have been on a tear this past year, and now investors are consolidating their gains, waiting to see what happens next.  Think of it as a plane in a holding pattern, circling the runway while it waits for a good time to land.

Why this new volatility in the markets?  That’s the question many clients have been asking us.  Well, volatility is always a product of uncertainty, and there are several areas of uncertainty that investors are dealing with right now.  We’ll address a few… 

The first area is inflation.

On Wednesday, May 12, most Americans probably woke up and read the news that Ellen DeGeneres was canceling her show.  Or maybe they checked the latest sports scores.  We enjoy reading this stuff as much as the next person, but, as financial advisors, our morning was spent reading something else: a news release from the Bureau of Labor Statistics revealing the Consumer Price Index for the month of April.

Here’s how it starts:

“The Consumer Price Index for All Urban Consumers increased 0.8% in April on a seasonally adjusted basis after rising 0.6% in March, the US Bureau of Labor Statistics reported today.  Over the last 12 months, the all items index increased 4.2% for seasonal adjustment.  This is the largest 12-month increase…since September 2008.”1

Riveting stuff?  Maybe not – but there’s some important information to be found in that paragraph.  Here’s what it says in plain English: Inflation is on the rise.

The fact inflation is rising is not a surprise, nor is the reason for it hard to understand.  With the worst of the pandemic seemingly behind us, the economy is opening up in a big way.  More and more people are going out to eat, visiting theme parks, traveling on airplanes, buying cars, improving their homes, etc.  In other words, people are demanding more goods and services. 

As we know from the Law of Supply and Demand, when the demand for things outpaces supply, prices go up.  With more people are vaccinated, and the CDC recently loosening their mask recommendations, demand has risen sharply over the past few months. 

Now, these conditions are all good for economic growth.  But for the stock market, there are two issues.  The first issue is that this economic growth was largely priced into the markets months ago.  Remember, stock market prices reflect what investors anticipate will happen tomorrow more than what’s happening today.  Investors expected the economy to grow, so they plowed more money into stocks.  Now, the growth is happening, but it’s simply confirmation of what people already expected. 

To show you what we mean, here’s a graph of the S&P 500 over the last twelve months.2 

So, what’s the next good thing investors can expect?  Unknown.  That’s the next area of uncertainty.  Previously, even when the pandemic was at its worst, investors had a lot to look forward to.  A vaccine.  Falling case numbers.  More government stimulus.  But now vaccines are here, case numbers have been falling for months, and there are no more stimulus checks in the offing.  It’s like returning from a trip to Disneyland.  The kids are exhausted.  The parents must return to work.  And everyone’s wondering when the next vacation will be.   

Until there’s something new to feel excited about, many investors worry there’s a ceiling on how much higher stocks can rise.    

Before we go on, let’s return to inflation for a moment.  We mentioned there were two issues with economic growth.  The second issue is fear.  Specifically, fear that the economy will grow too much, too fast.

If the economy grows too quickly, prices will rise across the board and the value of our currency would drop.  This, essentially, is inflation: When the general price level rises, a dollar simply pays for less than it used to.  That makes it much harder for people to buy the goods and services they need.  Or to pay off their debts.  It makes it harder for businesses to hire new workers or pay the workers they already have.  The upshot?  When inflation gets too high, consumer spending plummets, unemployment jumps, and economic booms turn into economic busts. 

For investors, the question isn’t about whether inflation will go up.  It already is.  The question is, will this inflation be temporary, or long-term?  The answer will determine how big of a deal it really is.

There’s certainly a good argument that it’s temporary.  That’s how the Federal Reserve currently sees it (more on them in just a minute).  The thinking is that this inflationary spike is driven by temporary problems related to reopening the economy.  As soon as society settles down and regains equilibrium, prices will settle down, too.  But we don’t know for sure.  It’s not hard to imagine a future where, by the end of the year, the world is still wrestling with the implications of the pandemic.  Supply could still be struggling to keep pace with demand.  Prices could keep rising.  We’re still a long way away from that.  But if that is what the future holds, the Federal Reserve would need to do something about it.

And that’s the other area of uncertainty.

You see, the Federal Reserve has what they call a “Dual Mandate”.  To put it simply, their mission is to “foster economic conditions that achieve both stable prices [manageable inflation] and maximum sustainable employment.”3 

The problem is, it’s not always possible to focus on both goals at once.  The Fed must prioritize, and right now, employment is a far higher priority.  For the last year, the Fed has helped prop up the economy by buying billions in bonds to keep interest rates low.  (Lower interest rates make borrowing less costly, which means businesses and individuals can borrow and spend more, thereby pumping more money into the economy.)  But that can’t go on indefinitely.  At some point, the Fed must raise rates, especially if inflation keeps rising.   

For months, the media has been asking the Fed when they expect to raise rates.  For months, the Fed’s answer has been some variation on, “Not until the economy is ready.”  Currently, the Fed simply doesn’t see rising inflation as an issue.  At least, not compared to the task of getting the economy back to full employment.  But for investors who’ve become hooked on the drug of low interest rates, these assurances do little to calm their fears.  Why?  Well, low interest rates mean that many types of investments, most notably bonds, simply don’t provide the same return on investment as they would in a high-interest rate environment.  That drives more and more investors into the stock market to get the returns they need.  But what happens when interest rates go up?  Consumers and businesses could cut back on spending, which in turn could cause earnings to fall and stock prices to drop. 

Rumors persist that the Fed will begin “tapering” their bond-buying sooner rather than later.  (This means the Fed will gradually buy less and less in bonds, resulting in a gradual increase in interest rates.)  Whenever the headlines even hint at this, the markets tend to spasm.  This is the cause behind many of the price swings we’ve seen in recent weeks. 

So, that’s the story behind the recent volatility.  The question is, what do we do about it?

The first thing we need to do is accept that these areas of uncertainty are likely to persist for some time.  In other words, we need to be mentally prepared for a sustained period of consolidation/volatility.  If the reverse happens and the markets resume their upward climb?  Fantastic!  But if not, at least we’ll be prepared. 

The second thing to do is remember that we are prepared – for short-term volatility and long-term inflation. If interest rate fears worsen and volatility goes up, we are ready to play defense and move to cash.  If there’s a general rise in prices and inflation skyrockets above what the Fed can handle, we don’t have to ride out another market crash like so many investors do.  As always, we’ll obey the rules of our strategy and do what the trend dictates.  If our technical signals indicate major volatility on the horizon, we’ll act accordingly.

The final thing you can do is let us know if you have any questions or concerns.  We’d be happy to speak with you!  But in the meantime, keep in mind that while April showers bring May flowers, June sun brings fun!  Summer is just around the corner, so go enjoy it.  Our team will continue to man the fort around here.  If there’s ever any action we need to take, or development you need to know, we will contact you immediately.  As always, let us know if there is ever anything we can do for you! 

1 “Consumer Price Index – April 2021,” Bureau of Labor Statistics, May 12, 2021.

2 “S&P 500”,, accessed May 19, 2021.

3 “The Federal Reserve’s Dual Mandate,” Federal Reserve Bank of Chicago, October 20, 2020.