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"The Sleeping Giant"- 2022 Annual Letter to Clients

"The Sleeping Giant"- 2022 Annual Letter to Clients

| January 18, 2022

“The Sleeping Giant”

January 3, 2022

“I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.”- Japanese Admiral Isoroku Yamamoto

One of the most famous quotes of World War II is attributed to Admiral Yamamoto shortly after the surprise attack on Pearl Harbor in the early Sunday morning hours of December 7, 1941.  While the attack was a success in nearly every aspect for the Japanese Navy, Admiral Yamamoto was one of the few leaders in the Japanese military who knew it was a mistake to underestimate the ability of the United States of America to come together in time of crisis.  The capacity of this country’s collective genius when focused on a singular problem or issue is surpassed by no other in history.  Defeating two enemies half a world apart in World War II, winning the Cold War, and the patriotism seen after the 9/11 terror attacks are just a handful of the times this has happened.  In late 2020, another “American Miracle” occurred with not one, but three vaccines for a disease just a handful of people had even heard of only a few months earlier.  Once again, Warren Buffet proved prophetic when he said to “Never bet against America” in his February 2020 annual letter to shareholders.[1]

Admiral Yamamoto and Mr. Buffet’s belief in the collective might of this country translates into our capital markets system as well. In just my lifetime of nearly 40 years, the average annual price decline (peak to trough) in the S&P 500 has exceeded 14%. One year in five, the decline has averaged at least twice that. And on two occasions (in 2000-02 and 2007-09), the Index has actually halved.[2] Yet the S&P 500 came into 1980 at roughly 400, and went out of 2021 at 4,766[3]; over those 40 odd years, its average annual compound rate of total return (that is, with dividends reinvested) was more than 12%.[4]  These data points underscore our conviction that the essential challenge to long-term successful investing is neither intellectual nor financial, but temperamental. The most important variable is how one reacts, or chooses not to react, to market declines.  These “behavioral finance” guidelines will continue to govern the most essential aspect of our advice to you in the coming year and beyond.

It would seem to be counterproductive to look at these past 12 months in isolation. They were, rather, the second act of a drama that began early in 2020, the precipitant of which was the greatest global public health crisis in a hundred years. The world elected to respond to the onset of the pandemic essentially by shutting down the global economy—placing it, if you will, in a kind of medically induced coma.[5] In this country, we experienced the fastest economic recession on record[6], and a one-third decline in the S&P 500 in just 33 days.[7] Congress and the Federal Reserve responded all but immediately with a wave of fiscal and monetary stimulus which was and remains without historical precedent.[8] This point cannot be overstressed: we are in the midst of a fiscal and monetary experiment which has no direct antecedents. This renders all economic forecasting—and all investment policy based on such forecasts—hugely speculative. Our advice to you, our clients, is that if there were ever a time to just put our heads down and work our investment and financial plan—ignoring the noise—this is surely it.

Now for some thoughts on the year to come.  In general, we think some likely storylines for 2022 may include:

  • The lethality of the virus continuing to wane thanks to a combination of knowledge of how to treat the disease along with continuing vaccinations and natural immunity.
  • The world economy continues to cautiously reopen.
  • Corporate earnings continue to advance, though at a slower rate than 2020-21.
  • The Federal Reserve begins to remove excess liquidity from the banking system, which will likely modestly increase interest rates.
  • Inflation subsides somewhat from current historical highs.
  • Barring some new “Black Swan” variable—which we can never foresee—equity values continue to advance albeit at a rate likely closer to historical annualized returns (dividends reinvested) of roughly 12% rather than the exceptional returns of the last three years.[9]


Please don't mistake any of these thoughts as a forecast, only that these outcomes seem to me more likely than not. I'm fully prepared to be wrong on any (or all) of the above points.  History proves that most of these assumptions will in fact be wrong, for better or worse. Either way, my recommendations to the majority of my clients will be unaffected since our investment policy is driven entirely by the plan we've made and not at all by current events.

With that out of the way, allow me to offer a more personal observation. To wit: these have undoubtedly been the two most shocking and terrifying years for investors since the Global Financial Crisis of 2008-09—first the outbreak of the pandemic, next the bitterly partisan election, then the pandemic's second major wave, and most recently a 40-year high inflation spike[10]. You might not be human if you haven't experienced serious volatility fatigue at some point. I know I have and will be the first to tell you the last two years have affected my family and I in much the same way as many of yours. However, what came to matter most was not what the economy or the markets did, but what we as investors ourselves did. If we fled the equity markets during either crisis—or, heaven forbid, both—our investment results more than likely still have not recovered. If on the other hand we kept acting on our long-term plan rather than reacting to current events, positive outcomes followed. You and I are long-term, goal-focused, plan-driven investors. We believe that the key to lifetime success in equity investing is to act continuously on a specific, written plan. Likewise, we believe substandard returns and even investment failure inevitably result from reacting to (let alone trying to anticipate) current economic or market events. We're convinced that the economy cannot be consistently forecast, nor the markets consistently timed. Therefore, we believe that the only reliable way to capture the full long-term return of equities is to ride out their frequent but historically always temporary declines.

As we conclude this letter, I’d like to offer a few personal thoughts.  I’ve had the privilege of working in this profession since I graduated from Auburn University in 2006.  I’ve met and worked with individuals, families, and business owners from all walks of life- each with unique beliefs and experiences that have shaped how they view the world and their place in it.  However, one of the few common themes among them is the want and need to strive to make the world better (and life a little more comfortable) for their children and grandchildren.  Another is that the United States is one of the few countries on Earth where this is still possible, no matter what we read or watch.  Since the market bottomed in March 2009[11], the “market experts” seem to use every negative headline available as some sort of warning that the stock market will crash and never recover.  While that’s entirely possible, I know that I personally will never bet against the greatest country on Earth, no matter what the most recent “end of the world” headline may be. Lastly, I thank each and every one of you from the bottom of my heart for your trust to help guide you and your family on your lifelong financial journey.  If you know of any friends, family, or colleagues who may be at a fundamental crossroads in their financial lives, please let us know. 



Robert M. Grant

P.S.- here’s a great picture depicting some of the more famous “reasons to sell” since the market bottom of 2009.  I’ve linked the article where you can find this image below.  I suggest taking a few minutes to read it as the author is one of my favorite financial bloggers and is a much better writer than yours truly!


Grant Wealth Management, LLC



Advisory Services offered through TrueWealth Advisors, LLC.  Securities offered through Concourse Financial Group Securities (CFGS), Member FINRA/SIPC.  Grant Wealth Management, LLC is independent of TrueWealth Advisors, LLC and CFGS, Inc.

All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

[1]   shareholders.html