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From the Desk of Brad Murrill, CEO Redfish Capital

Updated: Aug 9, 2022

2021 Review

As I write the S&P 500 is up year to date around 25%. No matter what you were hoping to see that is a big year folks. So how did we get here?

Once again, the leader of all market moves was COVID. Congrats COVID and would love to see you go. Most of the upside we saw was due to the reopening of the economy. We had a hiccup in the form of the Delta Variant, but the markets made it through Delta. Now we have Omicron. Omicron was found first in South Africa. This should not be too hard to believe that the entire country has a vaccination rate of around 27% which is extremely low. We are seeing a sell off right now (November 30) as this letter is being written.

So let me for a moment delve into why Covid has such a significant impact on the stock markets.

As I have mentioned before, the markets love certainty and hate uncertainty. Markets try to reflect the current market price of a company plus the expected growth. Covid throws a massive unknown in the overall economy. As you can appreciate, when the economy shuts down, people cannot leave and go to work. No products are being made, no one is around to transport these products, and no one is in the store to buy these products. That’s a problem! So, the stock market really became a Covid Hospitalization Watch Party. As this number rose and fell, the market followed suit.

Once the virus looked as if it was slowing down, the economy slowly opened. What happened then? Everyone ran out of the house and went shopping, eating out, and some traveling. Demand was there. The problem was a lack of supply. There were not enough goods on the shelves, employees in the restaurants, drivers in the trucks, and you get the picture. You can go back to high school economics class and remember the lesson we all learned on supply and demand. What we received was a big dose of inflation. Prices on the goods that we did have shot up. This inflationary scenario produced a new saying in economics...transitory inflation. In other words, once the supply increases in theory the prices should also come back down. Arguments from all sides were hitting the market blogs and conversation and the jury is still out on this.

What we did see consistently was volatility. These dips and rises in the market were fast and furious which can make investing a nervous venture. What we saw in 2021 was the stocks of companies that had a clear growth window did well. These were typically companies that were in technology that regardless of the economy we could forecast strong sales. Where that forecasting became foggy was in companies that required the consumer to be out and about to use their products (restaurants, casinos, travel, entertainment, theme parks) or simply put the cyclicals. The cyclicals were extremely volatile however that volatility did produce opportunities for savvy investors who were able to take advantage of these moves.

Looking Ahead

I expect 2022 to be a solid year. This COVID mess has sure been interesting to say the least and has added significant volatility to the markets that I fully expect to continue. As the news of new strains and hospitalizations come through, we are beginning to see somewhat of a pattern. Let me break 2022 down to a few topics.


The more people who are working is better for the overall economy. Today the unemployment rate is around 4.6 percent with 2.1 million people (about the population of New Mexico) taking unemployment payments. Historically speaking this is EXCEPTIONALLY low. The Great Recession in 08-10 produced a rate of 10% and when Covid shut down the economy in April of 2020 we hit a high of 14.8%. A low unemployment rate also pressures wages to increase as competition for jobs becomes fierce. More money for consumers.

Cash in Folk’s Bank Accounts

In the past I have written about and discussed M1 and M2 money on the Redfish podcast. Quickly, this is a measure of the amount of money that people have in their checking accounts, money market accounts, and savings accounts under $100,000. This figure tells me basically if people are struggling or not and folks, if these figures tell me anything, they are telling me that people across the board have more money than they have ever had. This I think is the result of the government injecting cash into these accounts (which is ending), jobs are plentiful, and rates are historically low.

Interest Rates

Interest rates are still extremely low. Bonds have almost no yield at all. The ten-year treasury bond (as I type) is yielding a whopping 1.43%. Rates will rise but slowly as the Fed indicated that they would possibly raise rates three times in 2022 (for a total of .75%) and then another three times in 2023 (another .75%).


Inflation talk will dominate the headlines.

When I look at the news it is all about inflation. Why now? Newspapers and news organizations are always a day late and a dollar short. What we are reading is mostly about how Suzie shopper spent more at the grocery store this week. So much of the “inflation” is down substantially from the highs a few months ago. Iron ore is down over 60% from the highs. Crude oil is off by more than 20%. Nat gas is down over 20% from the highs. Lumber prices have been halved from the highs in May of 2021. You are not seeing this in the news, but it is happening.

The Federal Reserve Board just released their decision on rates and forecast. They indicated that they expect inflation to run at a rate of 5.3% in 2021 and then slowing to 2.6% in 2022. An inflation rate of 2.6% is a sign of an extremely healthy economy.

I stubbornly remain entrenched in the camp that inflation will be present but mild. Mild inflation is good inflation. Inventory supplies will get back to normal levels. Advances in technology and innovation will continue to be a driver in efficiency thus keeping inflation at bay.


The predicting business is a tough business. I have said many times that if I had a superpower, it would be seeing the future or had a crystal ball. Unfortunately, I do not have superpowers, so I simply must parse the data like everyone else and make a best guess. All in all, most indicators say that we should have another good year in the stock market. People have jobs and cash. People tend to spend their money when they have it. When people invest, they tend to go where they think they can get the highest return.

One of the old expressions I have always loved is attributed to Wayne Gretsky. It has been overused in market parlance, but it carries weight. When asked about what made him great, he responded that he never skates where the puck is but where the puck will be. So, the question becomes where is the puck going? I think the puck is going back to a place where Covid is under control at some point in the first half of the year. The markets will most likely be very volatile in the first half and then I am guessing will have a very strong second half. I would think that the markets could deliver double digit growth by year’s end. I am looking for the second half to include inflation slowing down from its current pace of 5.3% down to around 2% as the supply chain issues will once again stabilize. With Covid under control I think people will be going back to shops, casinos, restaurants, and shopping. I think that the Infrastructure Bill (that finally passed) will have a positive impact on keeping unemployment low and good jobs will be available for the unforeseeable future. I think that tax rates will rise however this rise will be so slight that it will not affect the overall economy (this bill is still stuck in Congress). I think that we will discuss inflation all year long however, I think that it will decrease from a current 5.3% rate to around 2.5%. Finally, on the political front, this will be a mid-term election year. I am expecting a tremendous amount of volatility as we digest what the country will look like with the Republicans taking back the house.

To sum up...stay invested

As I type this, I realize that I could go on and on about various topics on why you should or should not be invested. To make it easy on me and reduce your reading time I think it would benefit us all to simply state that depending on your time frame...just stay invested. The data backs this. If your time frame is one buy at the open and sell at the have a 53% chance of making money. This would be like betting on coin flips. However, if your time frame is longer than one day then you are in good shape. Looking at the S&P 500 Index since 1926 we see the following: one year time frame you have a 74% probability of a positive return. 5 Years is 87.5%. 10 years is 94.1%. For the younger crowd we see that over a 20-year time frame there has never been a period that saw negative returns.

The portfolio we run for clients at Redfish Capital has a long-term time frame in mind. We invest primarily in companies that we feel are growing revenues at a rate that is faster than their peers, has brand name recognition, low debt, and is cash flow positive. Our clients own a percentage of their assets in this that depends on their personal time frame. For accounts for kids, with long term time frames, they own nothing but our portfolio. For retired folks, they may own 25%. The financial plan is the starting gate. That tells us how much of the portfolio someone should own.

The people who seem to have the best returns year over year are those who stay in the game. Instead of going all out or all in, these folks stay the course. We will go lighter or heavier on the allocation depending on the economic scenario, but we stay invested. We remain in the game.

*The numbers quoted above were taken directly from reports issued by Tom Lee at FSInsights and his year end discussion and presentation*

Brad Murrill and Robert Simpton are registered representatives of and offer securities through SCF Securities, Inc. - Member FINRA/SIPC Investment Advisory Services offered through SCF Investment Advisors Inc. 155 E. Shaw Ave. Suite 102, Fresno, CA 93710 • (800) 955-2517 • Fax (559) 456- 6109. SCF Securities, Inc. and Redfish Capital Management are independently owned and operated. The views and opinions expressed herein do not necessarily represent the views and opinions of SCF Securities, Inc. or any SCF-related entity. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. SCF does not offer tax or legal advice and this material is not intended to replace the advice of a qualified tax advisor or attorney. Please consult legal or tax professionals for specific information regarding your individual situation.

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