Craig's Corner - Navigating Through Dangerous Waters

Craig Robson, Founding Principal and Managing Director

On a recent scuba dive with my older son in Cozumel, he unfortunately realized his tank was out of air while approximately fifty feet below sea level. Without any hesitation he calmly and instinctively enacted the training we all must complete before certification. The first step you take is to locate your dive buddy and use hand signals to verbalize the situation. Then you secure and share air from another diver's tank, prior to gradually ascending back to the surface. When we got back on the boat, we of course discussed what happened, and realized the pre-dive errors he made. He mistakenly grabbed someone else's air tank, which was 3/4 empty, while also not looking at his dive computer to see how much air was in the tank. He also did not allow his dive buddy to check his air before entering the water. These simple mistakes created an alarming situation, and as his father I am grateful he implemented the safety plan put in place for that specific scenario.

When it comes to the financial markets, it might also seem like we are in dangerous waters. As of April 22, the capital markets are down 10.4% YTD.1 Experiencing YTD weakness in the S&P 500 during a midterm election year is not terribly surprising, but unfortunately this 10.4% YTD decline is the worst on record since 1946.2 While these are certainly disappointing equity returns, there are also a few positive aspects to report. I’ve listed them below.

  1. Corporate earnings: as of April 21, within the S&P 500, 73% of companies have beat earnings estimates and 64% beat sales estimates.3
  2. Investor sentiment: the weekly survey from American Association of Individual Investors (AAII) continues to reflect extreme bearishness with 30-year lows recently recorded. Historically, forward performance of equities occurs after we experience this type of investor sentiment.4
  3. Recessionary dampeners: I, along with other financial experts believe that strong corporate and consumer balance sheets as well as current state and local government surpluses may function as mitigating forces against a potential recession.

Despite the current economic cycle, I would like to point out that previously there have been and will continue to be points in time in which different asset classes, including equities, experience downside volatility. From my perspective, that does not mean you should not own them, rather understand your personal risk and return comfort levels when investing. You should continue to follow your financial plan, and think of this as your customized north star to follow towards your life goals.

This brings me back to my scuba diving experience in Cozumel. After debriefing with my son and our divemaster about the air tank mishap, my son was back on the boat the next morning for our next dive. However, before jumping back into the Caribbean Sea I asked him if he had any trepidations about diving and he replied, "no, as I won't make those mistakes again, and if I don't dive, I won't be able to see all the beautiful underwater marine wildlife which I enjoy".

I will close this Craig's Corner with a quote from Ralph Waldo Emerson, an American poet, philosopher, and essayist of the 19th century, “It is not length of life, but depth of life that matters.”

Craig Robson

Founding Principal and Managing Director

[1] The Bespoke Report, April 22, 2022

[2] The Bespoke Report, April 22, 2022

[3] The Bespoke Report, April 22, 2022

[4] The Bespoke Report, April 22, 2022