Eagle’s Eye January 2022 Client Letter

Dear Clients, Families and Friends:


My, how our world has changed. The last couple of years have been surreal to say the least. We’ve witnessed incredible market volatility, record low interest rates, negative crude oil futures prices, a self-inflicted recession due to the COVID-19 pandemic and lockdowns, a controversial presidential election and we’re now on our second variation of the Coronavirus – Omicron.

As a Certified Portfolio Manager, it is important to become divorced from day-to-day headlines, and focus on the investment process and risk management of portfolios. A good place to start is by looking at the wisdom of other successful investors and learning from their experience.

These wisdoms were born out of years of mistakes, miscalculations and trial-and-error. Of course, what made them all successful was the ability to learn from their mistakes and capitalize on that knowledge in the future. Experience is an expensive commodity to acquire which is why it is always cheaper to learn from the mistakes of others. As a result, I wanted to do something completely different this month by quoting a couple of high-profile investors’ thoughts on investing in the markets over the years. I hope you find this interesting.

James P. Arthur Huprich’s Market Truisms and Axioms

  1. Commandment #1: “Thou Shall Not Trade Against the Trend.”
  2. Portfolios heavy with underperforming stocks rarely outperform the stock market!
  3. There is nothing new on Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again, mostly due to human nature.
  4. Sell when you can, not when you have to.
  5. Bulls make money, bears make money, and “pigs” get slaughtered.
  6. We can’t control the stock market. The very best we can do is to try to understand what the stock market is trying to tell us.
  7. Understanding mass psychology is just as important as understanding fundamentals and economics.
  8. Learn to take losses quickly, don’t expect to be right all the time, and learn from your mistakes.
  9. Don’t think you can consistently buy at the bottom or sell at the top. This can rarely be consistently done.
  10. When trading, remain objective. Don’t have a preconceived idea or prejudice. Said another way, “the great names in trading all have the same trait: An ability to shift on a dime when the shifting time comes.”
  11. Any dead fish can go with the flow. Yet, it takes a strong fish to swim against the flow. In other words, what seems “hard” at the time is usually, over time, right.
  12. Even the best-looking chart can fall apart for no apparent reason. Thus, never fall in love with a position but instead remain vigilant in managing risk and expectations. Use volume as a confirming guidepost.
  13. When trading, if a stock doesn’t perform as expected within a short time period, either close it out or tighten your stop loss point.
  14. As long as a stock is acting right and the market is “in-gear,” don’t be in a hurry to take a profit on the whole positions. Scale out instead.
  15. Never let a profitable trade turn into a loss, and never let an initial trading position turn into a long-term one because it is at a loss.
  16. Don’t buy a stock simply because it has had a big decline from its high and is now a “better value;” wait for the market to recognize “value” first.
  17. Don’t average trading losses, meaning don’t put “good” money after “bad.” Adding to a losing position will lead to ruin. Ask the Nobel Laureates of Long-Term Capital Management.
  18. Human emotion is a big enemy of the average investor and trader. Be patient and unemotional. There are periods where traders don’t need to trade.
  19. Wishful thinking can be detrimental to your financial wealth.
  20. Don’t make investment or trading decisions based on tips. Tips are something you leave for good service.
  21. Where there is smoke, there is fire, or there is never just one cockroach: In other words, bad news is usually not a onetime event, more usually follows.
  22. Realize that a loss in the stock market is part of the investment process. The key is not letting it turn into a big one as this could devastate a portfolio.
  23. Said another way, “It’s not the ones that you sell that keep going up that matter. It’s the one that you don’t sell that keeps going down that does.”
  24. Your odds of success improve when you buy stocks when the technical pattern confirms the fundamental opinion.
  25. As many participants have come to realize from 1999 to 2010, during which the S&P 500 has made no upside progress, you can lose money even in the “best companies” if your timing is wrong. Yet, if the technical pattern dictates, you can make money on a short-term basis even in stocks that have a “mixed” fundamental opinion.
  26. To the best of your ability, try to keep your priorities in line. Don’t let the “greed factor” that Wall Street can generate outweigh other just as important areas of your life. Balance the physical, mental, spiritual, relational, and financial needs of life.
  27. Technical analysis is a windsock, not a crystal ball. It is a skill that improves with experience and study. Always be a student, there is always someone smarter than you!

James Montier’s 7 Immutable Laws of Investing

  1. Always insist on a margin of safety
  2. This time is never different
  3. Be patient and wait for the fat pitch
  4. Be contrarian
  5. Risk is the permanent loss of capital, never a number
  6. Be leery of leverage
  7. Never invest in something you don’t understand


And now, let’s review 2021 and talk about what might be ahead in 2022.

A banner year and a new year

The year 2021 was a banner year for investors. The broad-based S&P 500 Index, which is made up of 500 larger U.S. companies, finished the year up 26.9%. If we included reinvested dividends, the index advanced 28.7%, according to S&P Dow Jones Indices.

Table 1: Key Index Returns




Dow Jones Industrial Average



NASDAQ Composite



S&P 500 Index



Russell 2000 Index



MSCI World ex-USA*



MSCI Emerging Markets*



Bloomberg US Agg Total Return 



Source: Wall Street Journal, MSCI.com, MarketWatch, Morningstar

MTD returns: Nov 30, 2021-Dec 31, 2021

YTD returns: Dec 31, 2020-Dec 31, 2021

*In US dollars

Much better-than-expected corporate profits (Refinitiv), which were powered by an expanding economy, plus a super easy monetary policy compliments of the Federal Reserve, deserve much of the credit.

Low interest rates, low bond yields, and rising profits easily offset worries about the lingering pandemic and much higher-than-expected inflation.

But we are now looking ahead into 2022. What might the new year bring? After last year’s strong advance, what might be in store for this year?

Since 1950, there have been 26 years in which the total annual return of the S&P 500 Index exceeded 20%, according to data provided by the NYU Stern School of Business. In the following year, the S&P 500 Index advanced 20 times, or 77% of the time, in line with the long-term average.

The average up year was 18.1%, while the average down year was 6.4%.

It’s an interesting exercise, but let’s always remember that past performance is no guarantee of future performance. Each year will have its own distinctions.

We could add one more wrinkle. The total return of the index has doubled over the last three years, according to Dow Jones Indices.

What dictates the market’s direction will likely be the economic fundamentals and whatever impacts those fundamentals.

For example, what might the Federal Reserve do with interest rates? At the beginning of 2021, the Fed expected no rate hikes in 2022. However, it failed to anticipate last year’s surge in inflation.

As the year ended, the Fed’s new projections, which it released after its December meeting, reflected a forecast of three quarter-percentage-point rate hikes this year.

Are those potential rate hikes already being discounted by investors? If inflation fails to ease–or worse, accelerates–could the Fed take a more aggressive posture?

Let’s take this point one step further. Longer-term bond yields have remained very low in the face of a less dovish Fed, high inflation, and robust economic growth. 

Will we get a reset in 2022? Or have there been fundamental changes in the bond market that are holding yields low? Or do bond investors simply believe inflation and economic growth will slow?

Corporate profits are also a key driver of stock prices. Consider this: If you were to purchase or sell a small business, wouldn’t recent and projected profitability play a big role in the sales price? It absolutely would. The same principle holds for publicly traded companies.

How will the pandemic play out? We’ve seen Delta and we’re now seeing a surge in cases tied to Omicron. The economic impact of Delta was limited, and thus far, investors have side-stepped economic worries about Omicron. But what does 2022 hold?

We’ve posed several important questions that don’t offer easy answers. We may see a pullback in 2022, and we recognize that downturns are a part of investing.

Based on your goals, circumstances, and risk tolerance, we craft portfolios that help manage risk, but we can’t eliminate risk. 

If one trades the fear of a sell-off for a savings account, one won’t participate in the long-term upside that stocks have historically offered. Conversely, take on too much risk when the market has been strong, and you may experience sleepless nights in a swift downturn.

If life events have forced you to rethink your goals, let’s talk. Financial plans are not set in stone.

Yet, adherence to one’s financial plan and a long-term focus have historically been the straightest path to reaching one’s financial goals. We may see volatility next year. But predictions are simply educated guesses. As we’ve seen in the past, sell-offs, when they occur, are followed by rebounds. Keep this in mind as we navigate the New Year together.

As always, I’m honored and humbled that you have given us the opportunity to serve as your financial advisors. Never forget that we are here for you, your family and your friends.


Wishing you a Happy and Prosperous 2022,




 The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index. The MSCI ACWI ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries*. With 6,211 constituents, the index covers approximately 99% of the global equity opportunity set outside the US. The MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indices. The index’s three largest industries are materials, energy, and banks. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of William Y. Rice III and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee

that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does

not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information.