Three Minute Digest for August 30, 2022

August 30, 2022

A teenager lost a contact lens while playing basketball in his driveway. After a brief, fruitless search, he gave up. His mother took up the cause and within minutes found the lens.

“How did you do that?” he asked.

“We weren’t looking for the same thing,” she explained. “You were looking for a small piece of plastic. I was looking for $150.”

Cash has been a substantial asset class in our portfolios. We have taken much of the risk out of your portfolios and still posted appreciable returns against the indices. There remains concern for the health of the markets going forward.

Affinity Capital pays attention to the entire concept of investing as a whole, but just as the teenager was looking for a small piece of plastic, the mother was looking for its value just as we are looking at your entire financial life rather than a single impressive monthly or quarterly account statement. We all want to make money every day the market is open, but the goal is to achieve your lifetime financial goals.

A cash position is not of little strategic value in a portfolio. We believe that timing the market for long-term success is fraught with difficulty and we do not advocate this strategy. Increasing cash balances during obvious periods of market declines and significant economic uncertainty is prudent and has served us well. This is especially true as both stock and bond markets have declined in a period of economic “stagflation” not seen in fifty years.

There were rallies off the market lows and they came in two stages:

  1. The first was “short-covering” or gaining as the price declines.
  2. The second stage is investor money that was afraid of missing something and jump in. This is when emotion overcomes process and faith in investing.

There were three technical watch areas that we monitored during this rally from the market lows. These rallies had enough strength to reach the third level. The market did in fact reverse direction upon reaching our third level. We believe there is more long-term information about where and when to invest going forward especially after the Fed comment Friday from Jackson Hole.

The uptrend in the market broke last week and the Dow has sold off more than one thousand points. Our continuing belief is that this is a break in the bear market rally and the technical data points we interpret have been correct so far. The longer-term trend remains down! This market cycle will be measured over the next 12 to 24 months, at a minimum. Our present level of capital preservation mode is prudent.

We are in a position to evaluate levels in which to invest but overall, they are not encouraging. Nor do our fundamental tools such as economic data and corporate earnings provide a very inviting scenario for investing. The markets are forward looking but for now we see little optimism for next year. The Federal Reserve meetings centered around raising interest rates and the mid-term elections in November will be telling pivot points for the rest of 2022. Last week we added a 10% position of short-term Treasury Inflation Protected Securities, and we will continue to evaluate further opportunities.

We believe the best-case scenario is for the market to be stagnant going forward. Our Indicators tell us that breaking through the bear market rally and going higher is less probable. The likelihood of the markets falling all the way back down and lower remains a real concern. Cash is prudent yet a difficult choice to make.

Thank you for the opportunity to serve you and your family.

Markets, Geopolitics, and Recent Volatility

January 21, 2026
Recent market headlines have been driven less by economic data and more by geopolitics. In particular, renewed discussion around Greenland and its strategic importance has introduced a new layer of uncertainty into global markets. Greenland matters not because of its size or population, but because of its location and resources. It sits at a critical crossroads between North America and Europe, plays an increasingly important role in Arctic shipping routes, and holds significant reserves of rare earth minerals that are essential for technology, defense systems, and energy infrastructure. As global competition for these resources intensifies, Greenland has become a focal point in broader strategic and trade discussions. Markets reacted quickly to this uncertainty. U.S. stock indexes moved lower in a broad selloff, with technology shares leading the decline. At the same time, investors shifted toward more defensive assets, pushing volatility higher, lifting gold prices, and pressuring risk-oriented assets such as cryptocurrencies. Similar caution was reflected in overseas markets as well. When geopolitical issues intersect with trade policy, markets tend to respond swiftly. Even the possibility of changes in tariffs, trade relationships, or diplomatic alignment can influence assumptions about global supply chains, corporate earnings, and economic growth. That is what markets have been digesting. These developments are now a regular part of the global environment. Markets today must absorb not only interest rates and earnings reports, but also geopolitical strategy, resource security, and shifting alliances. This can create short-term market adjustments as investors reassess expectations. Geopolitical uncertainty does not automatically translate into lasting economic damage. Markets have navigated trade disputes, diplomatic standoffs, and strategic realignments many times before. Over time, clarity emerges, negotiations evolve, and economic activity adapts. We continue to watch these developments closely and view them as part of the broader global backdrop in which markets operate. While the headlines may feel new, the underlying dynamic of markets responding to geopolitical uncertainty is familiar and expected. If you have questions about how global events fit into the bigger picture, we are always available to talk them through. Understanding the context behind the headlines is often the most effective way to stay grounded when markets react to evolving global issues.

The Policy Pivot: Key Takeaways for Investors

December 11, 2025
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Finishing 2025 Strong: Key Trends to Watch

December 1, 2025
As we move into the final month of 2025, markets are adjusting to a new mix of encouraging economic trends and lingering uncertainty. November ended on a softer note, but December has opened with improved sentiment, clearer expectations around Federal Reserve policy, and a more confident tone in both equity and fixed income markets. Investors are watching these shifts closely, and the weeks ahead will help determine how the year ultimately finishes. At Affinity Capital, we continue to see an environment supported by quality leadership, steady earnings, and more attractive income opportunities. At the same time, late-cycle pressures and uneven economic data remind us that thoughtful risk management remains essential. A More Constructive Tone to Start December December began on firmer footing after several weeks of mixed performance. The most significant driver has been the market’s growing conviction that the Federal Reserve is getting closer to the start of a rate-cutting cycle. Current pricing suggests a meaningful chance of a cut in the near term, which has helped lift sentiment across equities and high-quality bonds. This optimism has also supported areas that tend to benefit from lower yield expectations, such as precious metals and rate-sensitive parts of the market. While not a guarantee of what comes next, the shift toward more accommodative policy expectations has created a more balanced backdrop than we saw earlier in the fall. Economic Data Remains Mixed Despite the improved tone, the incoming data continues to show pockets of weakness. Manufacturing activity has contracted for another month, hiring momentum has slowed, and consumer spending has moderated from its pace earlier in the year. The recent government shutdown delayed several economic releases, and the catch-up process has added some short-term noise to the data stream. What stands out is the contrast between a resilient corporate earnings picture and a softer macro environment. Many large companies continue to report healthy margins and steady demand, yet the broader economic indicators suggest that growth is losing some steam. This type of divergence is typical in late-cycle phases and often results in more frequent market swings. Volatility Has Picked Up After months of historically low volatility, markets have begun to experience more frequent fluctuations. Concerns around artificial intelligence valuations, regional banking stress, and geopolitical developments have all played a role. Volatility is not necessarily a sign of structural weakness, but it is a reminder that investors should expect a less predictable finish to the year. For diversified portfolios, these swings can create opportunities to rebalance, harvest gains, or add exposure to areas that have repriced more attractively. They also highlight the importance of high-quality holdings that can withstand periods of uncertainty. Opportunities Across Equities and Fixed Income Even with the mixed data backdrop, the overall investment environment remains constructive for long-term investors. High-quality U.S. companies with strong balance sheets and consistent earnings continue to provide stability at the core of portfolios. Select small-cap and mid-cap companies have also begun to show signs of improvement as rate expectations shift. In fixed income, today’s yields offer significantly more value than they did for much of the past decade. Bonds once again contribute meaningful income, and the possibility of lower rates in 2026 creates potential for price appreciation in high-grade credit. This combination strengthens the case for balanced portfolios that include both equities and fixed income. Positioning Into Year-End Given the current landscape, we believe the market is moving toward a finish that is neither overly exuberant nor overly cautious. Several key themes are likely to guide performance over the coming weeks. Quality leadership continues to play an important role, especially in sectors tied to innovation, cloud infrastructure, and digital transformation Broad market exposure remains valuable in capturing the benefits of seasonal strength and earnings resilience Dividend-oriented and defensive holdings support stability in late-cycle environments High-quality bonds offer attractive income and diversification benefits Small-cap and mid-cap allocations may provide long-term upside as rate expectations shift Looking Ahead As the year comes to a close, investors are balancing two realities. On one side, there is growing optimism around potential rate cuts, resilient corporate earnings, and improving seasonal patterns. On the other side, there are signs of slowing economic momentum, higher volatility, and continued geopolitical uncertainty. The result is a market that rewards discipline, diversification, and a focus on long-term goals. At Affinity Capital, our approach remains steady. We continue to emphasize high-quality holdings, balanced allocations, and thoughtful adjustments based on data rather than emotion. The coming months will bring new information, but the principles that guide long-term success remain unchanged. We are here to help clients stay aligned with their plans and positioned with confidence as we move into a new year.