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A Personal Note from Cam - Dated October 18, 2022

A Personal Note from Cam - Dated October 18, 2022

October 18, 2022

A Personal Note from Cam – Dated October 18, 2022

First and foremost, before I delve into current financial thoughts, I wish to share that our prayers are with our friends, family, and anyone affected by Hurricane Ian.

I have had a chance to talk with all of our Florida clients since Hurricane Ian made landfall.  Gratefully, none of them were impacted directly by the destruction Mother Nature is capable of delivering.

 Inflation is Crippling the Economy

The past four months, and for that matter all of 2022, have been full of day-to-day surprises in America and worldwide.

When Russia invaded Ukraine in a major escalation of the Russo-Ukrainian War on February 24, 2022, (this war actually began in 2014), it sent shockwaves across the globe.

Today, this ongoing war continues to exacerbate food and energy shortages worldwide.

If one goes back to 1982, (when I first started my advisory business) you will find inflation rates today as high as they were 40 years ago.

Regardless of what our politicians might wish to project on the subject of inflation, the Federal Reserve has been tightening for about six months now and inflation still does not seem to be budging. 

At least some things are clear: This bout of inflation is not transitory – it’s seeped into the bones of the economy.  This makes knowing when monetary policy will begin having a noticeable effect even more unpredictable.  The financial markets seem to expect the Federal Reserve to start easing in 2023, but Fed officials have been adamant they will keep rates high, and keep raising them, until inflation comes down.  So, when will that be? [1]

I have shared that the financial markets do not like uncertainty many times in the past. Unfortunately, uncertainty caused by these and other factors mentioned above is why stocks – and those of us who own them – have been clobbered in recent months. 

From the way the financial markets are behaving, one might think that some of the world’s largest and most profitable companies are suddenly becoming dramatically less valuable.  Are they all laying off workers, slashing prices, closing factories and declaring imminent bankruptcy? [2]

None of that is happening.  Stock prices have never been a precise indicator of what companies are worth.  They are a very good indicator of what people are willing to pay for their shares, and right now there seems to be more sellers than buyers.

Why?  The reasons for bear markets are seldom rational—which, of course, is why bear markets end and stocks return to (and always, in the past, have surpassed) their original highs.  What’s happening right now is not unlike what happens when we are diagnosed with an illness, and the remedy is a daily dose of some awful-tasting medicine.

The illness, in this case, is inflation, which absolutely has to be cured if we are to experience a healthy economic life.  Few things are worse than having the money you have saved up deteriorate in value at double-digit rates, which is precisely what has been happening this year.

The cure is the U.S. Federal Reserve raising interest rates, which is its way of reducing the amount of cash sloshing around in the economy.  Rising consumer prices, just like rising stock prices, come about when there are more buyers than sellers.  Reducing the available cash reduces the number of buyers in relation to sellers (ironically, both in the consumer marketplace and on Wall Street), and finally slows down the inflation rate to manageable levels.[3]

We can already see how this works in the housing market, where, just a few short months ago, multiple would-be buyers were bidding against each other to pay more than the asking prices.  As mortgage rates have risen, the frenzy has completely dissipated.  The process takes longer in the consumer marketplace at large, but you can bet it is working behind the scenes.Doesn’t less spending mean less economic activity?  Doesn’t that lead to a recession?  The answers, of course, are yes and maybe.  But at this point, a recession might not be all bad for the economy.  Recessions act like a cleansing mechanism, exposing/eliminating waste and inefficiency, ultimately creating a healthier economy when we come out the other end.

So right now, we are taking our medicine, and boy does it taste awful.  We are also, collectively, suffering an economic illness.  Anybody who has come down with a bug and taken medicine to cure it knows that the former unpleasantness doesn’t last forever, and therefore neither does the latter.

No Recession, Yet

The distortions of economic activity from lockdowns, massive deficit spending and money printing are immense. It is hard to imagine the US can unwind these policies and not have a recession.  I just do not think one has started yet.[4]

Monetary policy, for example, is going to have to get tight and stay tight to bring down inflation and keep it there, so we do not get into a stop-and-go cycle of inflation problems like we did back in the 1970s and early 1980s.  And a monetary policy that gets tight enough and stays tight enough for long enough to achieve that goal is very likely to cause a recession.  We are just not there yet.

Some estimates say it takes about a year or more for monetary policy changes to have an impact on inflation.  The thinking goes that wage increases occur once a year and rents are set for a year or more in advance.  Raising interest rates increases the cost of borrowing, which reduces the money available for investment, which in turn slows hiring and wage growth and eventually increases unemployment before inflation comes down.  Unfortunately, it is far from an exact science. [5]

Some Thoughts on the Impact of Recessions

The financial markets have ebbs and flows, and so does the economy.  Recessions are not always extreme.  They can be shallow and short-lived.  What’s more, markets do not necessarily lose value for the entire recession.  They usually start recovering before a recession is technically over.

A data point I saw last week was in a report prepared by Jason Bodner. He quoted Data-Trek co-founder Nicholas Colas as stating that although the S&P 500 is down more than 23% year-to-date, it only took nine bad trading days to do all that damage. [6]

The stunner: Remove those nine days from the results and the S&P 500 would actually be up 8.6% year to date.[7]  Unfortunately, those nine days cannot be erased.

It is for these reasons we do not attempt to time the financial markets.

Our goal as your financial adviser is to help you make adjustments to your long-term financial plan when changes are required. As the world changes around us, we are constantly challenging our assumptions and always striving to adapt to the changes we are witnessing.

We share these thoughts with you when we talk and assess your risk tolerances, which in turn helps us make sure the asset allocation strategy we are using for the diversification of your investment assets is still the right one.

One of the questions we have been hearing these past few months is “Does this big drop in my portfolio throw off my plan?”

The plans we create and monitor take into account market volatility and changes in inflation rates. They are designed to be resilient.

Our recommendation is that you stay focused on the things you can control, such as discretionary expenses.

If you reduce your discretionary expenses in times such as these and continue to build your cash reserves so you are not forced into selling assets in a down market, you too should be able to weather the current market storms.

If you have any questions, please call or email, as we would be more than happy to talk with you at any time.

Yours truly,



The information provided is not a complete analysis of every material fact and are subject to change.

Securities and some investment advisory services are offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser.

Financial Planning and some investment advisory services are offered through CTA Wealth Advisors, Inc., a Registered Investment Adviser.

CTA Wealth Advisors, Inc. and Cetera Advisor Networks LLC are non-affiliated companies.

The opinions expressed in this letter are those of Cameron M. Thornton, CFP®.  All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.  All economic and performance information is historical and not indicative of future results.  Past performance does not guarantee results.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor.  Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

A diversified portfolio does not assure a profit or protect against loss in a declining market.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.  The NASDAQ 100 Index is a large-cap growth index that includes 100 of the top domestic and international non-financial companies listed on the NASDAQ stock market, based on market capitalization.

Websites provided as a courtesy and are not under the control of Cetera Advisor Networks LLC or CTA Wealth Advisors, Inc.

Cameron M. Thornton, CFP® is a Registered Representative with Cetera Advisor Networks LLC and may be reached at or
(818) 841-1746.


[1] The Fed is Giving Americans a Harsh Lesson in Lag Time. Allison Schrager. October 18, 2022.

[2] Bob Veres. Inside Information. “The Cure” and following.  September 24, 2022.


[4] First Trust Monday Morning Outlook. “No Recession, Yet” and following. October 3, 2022.

[5] The Fed is Giving Americans a Harsh Lesson in Lag Time. Allison Schrager. October 18, 2022.

[6] Quantum Edge Pro. “The One Safe Harbor in this Stock Market Storm” by Jason Bodner. October 12, 2022.

[7] Ibid 6.