January 16, 2023

Dear Friends:

A Good Time for Savers!

 The high inflation years of the early 80s were a bad time for the economy, but a great time for savers, pop music lovers, and hair bands.  It was during that time that my (Mitch’s) parents drove me (certain that I was sporting my fresh new Members Only jacket and we were playing Michael Jackson Thriller on cassette tape) to open my first bank account at the local bank.  I still remember it paid 7%.  7%!  “Wow”, I thought, “so I just make this deposit and then earn 7% per year?”  Well, then the 90s, 2000s, and 2010s hit and inflation waned so too did interest rates with bank savings rates going all the way down to 0% in recent years.

Until 2022, when inflation reared its ugly head in a big way, which created big headwinds for both the stock and bond markets this past year.  While this period has clearly been challenging from investing perspective, the silver lining is we now have a much more compelling environment for investors of both lower risk assets as well as more growthy assets. For example, we were recently able to get a private 1 yr bank bond offering 7% backed by a major global bank.  We also have short term cash and treasury fund options yielding 4.25%, while stock market valuations offer much more attractive prospects for long term growth.  Back to the 80s is a Thriller in more ways than one!

The 4th Quarter Portfolio Performance Was A Bright Spot

Despite the difficult environment in 2022, our portfolios at EFinancial Alliance materially outperformed the corresponding market indexes actually had a very strong 4th quarter.  Many portfolios were up 5%-10% in the 4th quarter, while down far less than the S&P’s -19% and bond markets -14% for the full year.

Most of the outperformance was driven by our efforts to 1) intentionally limit exposure to overly expensive growth stocks, 2) lessen interest rate risk utilizing shorter duration bonds, floating rate notes and structured notes, and 3) tilt our positions in stocks towards value and energy which paid off nicely in 2022.  Our diversified portfolios far outpaced the standard 60%/40% mix utilized in many 401K plans.

Moving forward, as we look across the investing landscape, we believe there are attractive opportunities for long term growth in addition to the significantly higher dividend and income rates being paid on both equities and debt investments.  While the recent volatility is likely to persist for a while with the Fed continuing to raise rates, we believe that 3, 5, and 10 years down the road we will see significant appreciation in both large cap and small cap stocks.

 Key Tax Dates for Q1

1099s from Mutual Funds may not be fully sent out until the end of February.  We will keep you updated.  Also, for both IRAs and Solo 401ks the deadline for contributions is your tax filing date with a few exceptions.  If you have any questions, please don’t hesitate to reach out!

As always, we are extremely grateful for each of you and thank you for your partnership!


Mitch Anderson                                           Destin Tompkins