Michael J Chapman, CFP

                    Phone: (317) 705 1999

FAX: (317) 705 1994


Winter 2023 Client Letter

Dear Valued Client,


2022 was a pivotal year in financial markets:


  • Failure of the traditional 60% / 40% investment model (Stocks/Bonds)
  • Start of a bear market in stocks
  • End of 40-year bear market in bond yields (Dramatic rise in rates)
  • Confirmation / Validation of PCM’s tactical, rules-based approach to investing



Failure of the traditional 60% / 40% (Stock/Bonds) investment model: Remember, as interest rates rise, bonds and bond funds decline. In 2022, the US long Government and Corporate bond indexes were down 29% and 25%. In 2022 both stocks and bonds were down significantly, leaving investors using a traditional Global 60/40 model down 21%. (60% equally weighted Equity, 40% equally weighted Bond from above indexes)The only asset class that was up for the year was Commodities. (See Index chart above).

Start of a bear market in stocks: In my Spring 2022 Client letter I suggested, “The first quarter of 2022 may have been the start of a bear market.”  This now appears even more likely as the S&P 500 and the NASDAQ 100 closed the year down 18% and 32% respectively. I use the word “Start” because the relatively mild decline so far, has some pundits suggesting that this is a sign of “resilience”. However, because we are coming from the most speculative level of valuations in U.S. history, I share John Hussman’s position which is,

Despite being nearly a year into what we expect to be a far deeper retreat, the relatively shallow loss isn’t even surprising. The same thing happened in the first year of each of the three deepest post-war stock market collapses: 2000-2002, 2007-2009, and 1973-74.

Specifically, from the March 24, 2000 bubble peak through March 9, 2001 (just under a year into that bear market, as today), the S&P 500 index lost only -19.3%. Similarly, from October 7, 2007 through September 19, 2008, in what was soon to be known as the global financial crisis, the S&P 500 lost just -19.8%. From January 11, 1973 market peak to January 2, 1974, the S&P 500 lost just -18.8%, amid a bear market that would ultimately take the stock market down by half”.



End of 40-year bear market in bond yields: The 90-day Treasury Bill peaked in 1980/81 at 16% and declined to near zero percent during the “great financial recession” of 2008.  Rates remained near zero percent until they began moving dramatically higher in 2022. (See 3-month Treasury chart below.)  

Confirmation / Validation of PCM’s tactical, rules-based approach to investing: Contrast the losses in the table (on first page), to PCM’s rules-based strategies, many of which were up or only down slightly for the year.  As an example, I’ll list a few of our most used composites: PCM’s Absolute Bond Plus composite was up 1.83%. Our Liquid Reit composite was up 7.87%.  PCM’s Absolute Bond was up 2.34%.  Our Balanced composite was only down 4.16% and our Super Macro composite was down 3.83%.  Your specific account and portfolio returns can be found on the performance statements enclosed.

I believe our safety first, rules-based approach will continue to be effective in navigating the ever-changing investment landscape. True diversification comes from having non-correlated investment strategies, which is how we have built your investment portfolios. 



Great News!  Because short term rates are dramatically higher than they have been in a decade, we can now earn you a current yield of 3 plus percent in a Schwab money market fund.  You may see this in your accounts in lieu of the TD sweep account.


It is tax season:

  • All capital gain/loss cost basis should now be contained on your TD / Schwab 1099’s.
  • Drew will be happy to work with you or your tax preparer to ensure all needed documents are received.


Kindest Regards,



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