First, let me start by saying, Erika, Rowdy, and I send our heartfelt prayers to the people of Ukraine currently and still being attacked. While this letter will connect some dots pertaining to their conflict, I hope it never is lost on us that these are real people going through real trauma in their lives, and the economic effect we are feeling here has no comparable value to their loss of life.

This has been one of the stranger quarterly letters I have had to write. I have been through 2 great recessions, a credit bubble, real estate bubbles, commodities market destruction, CMOs, LBOs, NFTs, scams, scoundrels, and the like. All those time periods have similar strategies to come out in good shape: diversification, focus on fundamentals, and sticking to the plan. This continues to be my advice to long-term investors. However, in this rare case, last quarter diversification hurt more than helped.


Since 1976 there have been 50 quarters of negative returns for stocks. Of those 50 periods of negative returns, bonds have outperformed 47 of those periods.  Which makes sense, and easy Florida State math says that’s a 94%-win rate in the last almost 50 years.  Pretty good chances if stocks go down, bonds will go down less, pretty good is not perfect.  The first quarter of 2022 saw the aggregate bond market decrease 0.6% LOWER than the equity market. Reasons being the war in Ukraine and the ensuing commodity rally, higher than expected inflation, and the Feds intentional orchestrating of future interest rate increases. In fact, US Bonds declined at the same rate as Non-US Developed equity markets (read international stocks)!  So, a traditionally safe asset class declined by the same amount as a traditionally very risky asset class!

Normally in times like this I can point to the bonds in a portfolio and say, “this is why we diversify” but in this 3/50 occurrence, diversification did not pay off. Yet, we will see.


As expected higher volatility, lower real returns, these things happen from time to time and should be built into all return assumptions over the long period.  The war in Ukraine didn’t even spook the US market as much as I expected. Here is my take, portfolio managers are so rich in US stocks considering their outperformance over the last 10 years, there is little exposure to Russia or Ukraine economies, and therefore, the earnings wouldn’t be affected to a great extent.

It looks like the easy money has hit the exit for the near term, hang on to your hats. Here are some strategies for volatile markets:

  1. CONVERT; GREAT time to convert your IRA to a ROTH, Math break!
  2. • Convert 100K IRA to a ROTH when market is down (approx. 10%)
    • Tax = 33K on conversion (combined fed and state, if more than this it is not a home run)
    • Market climbs close to 0 for the year and adds 10% for an end of year net return of -1% to -3%
    • ROTH Balance at end of year = $110K adds 10K to tax free basis and lowers net tax to 30%, and you pocket the extra 3%. Thank you, Phil!

  3. Give cash, not securities to charities if you must give right now. If you can, wait and then consider a donor-advised fund.
  4. Great time to gift stock to kids
  5. Great time to contribute to ROTH IRAs
  6. Great time to contribute to 529s
  7. Great time to invest earning
  8. Reverse gifting. Giving to parents is allowed!  Gift low basis stock or assets that have taken a hit, lowering the amount that is taken from your gift exclusion.  Stocks appreciate when in your parent’s control, and you get the stepped-up basis at death.  Not a fun dinner table conversation, but I thought I would mention.

Things I am watching

  1. The soap opera that is Twitter! The story of a scrappy immigrant who became the wealthiest man on the planet by being super-duper ridiculously smart (shout out to Zoolander there, hope you caught it).  Does the Twitter verse love him?  Hate him? Who cares? Should you?
  2. Earnings season, Amazon, Google, Apple. All good barometers for the economy (not necessarily the stock market).  Good earnings may usher in a nice market rebound into the summer.
  3. Durable Goods, Consumer confidence, new home sales, and crude inventories
  4. Start of MLB season and NHL playoffs. Go Kings!
  5. Remember: TCJA (Tax Cuts and Jobs Act) sunsets in 2026 (at the latest), and with it, a lot of the tax breaks we are currently enjoying. Don’t wait too long to sell that property you have been wanting to unload, it may be more expensive in the future.
  6. Halloween Indicator or the “Sell in May and go away” theory. It’s a coin flip whether this works, but if sentiment is bad enough, it may make some take refuge in those bonds that have recently took a hit.
  7. Interest rates? Nope, the Fed has already telegraphed their play.

Enjoy the end of your Spring, and the start of your summer! Call or email my office with any questions or concerns.

Philip Clark, CPWA®, CFP®, CLU®| Director – Wealth Management
Direct: 626.788.3947 |


This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional. These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 04/29/2021 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results.

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