Atlas Note – September 28th, 2022

by | Sep 29, 2022

September 28th, 2022

What’s in this Atlas Note

  • Market Notes
  • The Truth about Inflation
  • Portfolio Growth Mentality
  • Portfolio Protection Strategy
  • Balance of 2022, prepping for 2023

All –

Hope you enjoyed your summer and believe it or not, Q4 2022 is about to begin next week. The holiday season is near and usually kicks off with Halloween. The government wants the consumer to keep spending and despite higher prices and input costs, it doesn’t matter, the consumer is two-thirds of the U.S. economy and need to keep it chugging along. Spending and saving rates are always quite the conundrum of how much should you be saving versus spending. The economy wants to sustain itself with consumer spending, but its the U.S. Dollar that is at the highest rate in years. Meaning, we won’t be exporting as many goods because they are too expensive for many countries based upon their currency exchange rate. The higher our dollar goes, the tougher it will be to avoid recession. The only positive to a very strong dollar is if you are buying goods from outside of the U.S. or you are traveling internationally. We will discuss some other critical factors moving forward you need to be aware of that will affect your portfolio.

Analytical Note to Provide Some Shade*

The S&P 500 Index was down 6 days in a row. This only happened 20 other times since 1950. One(1) Year Later the S&P 500 Index was Higher 90% of the time and up 20% on average. This all goes into our investing manta to keep consistent contributions and reinvest those dividends.           *Source: CNBC


The overall market is testing the June lows as the Fed has tightened with more Interest Rate hikes. They have indicated they will continue to do so and the market is “correcting” based upon that anticipation. The market is always 6+ months ahead of the economy and baking in the Interest Rate hikes into their valuations of the market and select economy areas. The Bond and Fixed-Income Market have been truly getting thrown around and at multi-decade lows. Although the Interest Rate hikes have not damaged the “income generation” of those fixed-income assets, the underlying assets have seen a precipitous decline. Historically, they typically will stay around their average “mean” and once the rate hikes slow, stop and/or lowered, then these Bond and Fixed-Income Assets will return to normal price levels.


The last time inflation was at the current levels, it was a generation ago (depending on how you look at it). Raising the Fed Rate (Interest Rates) “does not” have an immediate effect on inflation. Meaning, just because you are pouring cold water to try and make the inflation rate abate, it will not have the immediate effect you would hope for. It typically takes a minimum of 6 – 9 months to see inflation rate improvement and another reason why the Fed is almost always behind the curve. They always say they are data dependent. Since that is the case, they are always going to be late. You have read this in previous Atlas Note’s and I’m always beating the drum for patience, but the Fed should have been slowly increased rates second half of 2021. Many investors only see what’s in front of them and short-sighted instead of looking at the big picture and longer horizon line. We had three(3) straight years of double-digit gains in the market and a hot economy where the government just printed money and gave it away. There should have been other government programs to help people other than printing money but politicians (on both sides) need to get re-elected. The average citizen doesn’t understand economics and the long-term adverse effects of all these policies. They just know what is in front of them and will take anything the government gives them. By the way, when I say the average investor, this is across all socio-economic groups, not just paycheck-to-paycheck people as you may have tried to deduce from the content above. Free money and lose policies affect everyone. We will be writing about this more as the months progress as we look for the inflation rate to decline to 5% or less level by end of 2023 and under 4% by end of 2024. Fed models and top economists are looking for similar downtrends in the inflation rate.

PORTFOLIO GROWTH MENTALITY                                

If your horizon line towards retirement or easing back on the rat race throttle is at least 5 years out, but more like 10+ years away, despite your Risk Tolerance you need to reduce and pull the plug on your emotions. Nobody knows more than me that money and your net worth is an emotional factor in your life. It is the oxygen you need to feel safe and comfortable now and what you hope for down the road. Investing in the markets is art, not necessarily science. Canned portfolio models have been proven to not be effective because, “everyone’s situation is different”.

It is ok to have some speculative assets in your portfolio, typically less than 5% despite your investing horizon, but unless you can afford it, adding significantly more than that, is probably not prudent. Many investors love speculative assets and enjoy the upside of them when the market is strong, but when the market is weak, they will break many hearts.

Dividend paying stocks and funds should always be a part of any portfolio. Historically, great investors know that companies that pay dividends have good cash flow want to reward investors for holding their stock. Over time (100+ years of the stock market), good dividend paying stocks will consistently grow slowly, even for longer investing horizon lines, but they aren’t sexy. Who says investing has to be sexy. Making money and building wealth over time is sexy, not looking for quick hits and trading, which has been proven decade after decade to be a losing proposition.

In your high quality positions, keep adding to them on the way down, because on the way up you will be compounding your returns and reinvesting those dividends along the way and will make you look even smarter, if not brilliant. Of course guidance from Atlas advisors on this course would like to take a little bit of credit but we need to apply “patience”. Next year, 2023 will be a tough year, especially if geo-political events heat up. Be smart while keeping your emotions in check and look at your account monthly or quarterly, not weekly and certainly not daily. Many very good investment opportunities will present themselves over the next 6-12 months and you need to be ready for them.


Let’s say you like your portfolio and the positions you are invested in but you don’t like the market conditions and the “fear” in all the headlines you are reading, what do you do? Going to cash is always considered but not necessarily the best course of action, especially in taxable (Investment-oriented, not IRA) accounts. The tax burden going to cash many times makes this move worse than the thought of doing it.

There are three Portfolio Protection Strategies that we will address briefly below:

Writing Call Options (Derivative investment) –

This strategy helps protect some downside while generating immediate income for you. This works better for lower volatility assets, but on higher volatility assets you could use a shorter-term duration to protect that position. Writing Call Options are time sensitive and depending if you are looking for income or protection will determine what the time horizon may be. This is a safe way of portfolio protection in either an IRA or Investment-oriented accounts.

Put Options (Derivative investment) –

Look at this similar to “insurance”, but you have the ability to actually make money on this insurance. This gets more complex, but you would determine on a particular position(s) or on your overall portfolio how much downside are you looking to protect, then determine the horizon line. You could also ladder out the protection. Meaning, you are looking at 6, 9, 12+ months for protection and you could get insurance in each of those time frames. If the market is flat to up, then the insurance was in place to protect you. If the market is negative or really negative, then the Put Options increase in value to protect the downside of your portfolio.

Fixed-Indexed Annuities[FIA] (Insurance product) –

FIA includes 100% principal protection and has the ability to grow over time if the market is up during select time frames based upon the FIA available to you. Each situation is different and you only pay fees to the Insurance company when you lock in on the upside and added to your principal as the new floor for principal protection. There are other shorter-term FIA’s that have guaranteed annual interest rates for their terms. Many times these are 2,3,4 an 5 year contracts at a guaranteed interest rate with 100% principal protection. These products are good for a “small percentage” of your portfolio, 15%-25% unless there are health, medical or special needs situations to consider.


As we have mentioned in several prior Atlas Note’s we expected a weak market going into the November Mid-Term elections, then a nice pop of 5%-10% in the markets going into year-end. Geo-political situations aside, the markets should recover a bit. Real Estate is looking more and more as a weak area to invest and the markets are the best place for medium and longer-term returns.

As we mentioned above we are looking for inflation to abate to the 5% or less level by end of 2023, but next year will be a tremendous unknown and potentially a very tough year on the economy. As the Fed tries to stunt inflation, we really won’t know the affects and time line until it happens. Not much insight there I’m sure you are thinking, but this means depending on your horizon line, you will need to make some moves by year-end on your portfolio. This could include but not limited to; Initiate or add to Portfolio and/or Position Protection, remove select speculative assets, re-position to more dividend paying and lower volatility assets and select key positions to add to in order to compound returns. Some, most or all of these items above may need to be considered and implemented and depending on your portfolio size and time, you need to put a plan in place and when the time comes, act accordingly.


You know we are not doomsday people or wear rose-colored glasses when it comes to discussing the economy and markets and how they will affect you. It will be presented unvarnished, raw and bluntly. As we have stated before, everyone’s situation is different and mission-critical on your part to make sure you understand the core factors (not necessarily the underlying factors) on what may affect your portfolio. Job Security may be an issue over the next 12-18 months and the proper positioning of your portfolio will help you in comfort and security if you are nearing retirement.

We are recommending setting up a portfolio review by end of November. Start emailing us some dates that may work for you.

Announcement: We are now offering Financial Planning software to all clients. This will help you consolidate all your investment, 401(k), IRA, checking and savings accounts. You can link your credit card accounts and perform budgeting within this robust product. By inputting goals and expectations for retirement and income, this software will help you stay on track.

CLICK HERE – Check out our new web page for this Financial Planning software (including video)

With Best Wishes,

Ronald E. Lang, Principal & Chief Investment Officer

Atlas Wealth Management, LLC – 888.403.9400