Our Predictions for Election Day We aren’t political analysts, but we do have the conviction to make this one prediction about today’s election. Regardless of which candidate wins the White House, the long-term winner will be deficit spending. That’s the one policy on which both parties seem to agree. In the following video, we discuss the implications and how we are positioning client portfolios. We’re available to address any questions you may have, as always. Yours in the Field,  Frank Byrd, CFA Steve Korn, CFA IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

"Knowledge itself is power." - Sir Francis Bacon (1597)   "Power itself is knowledge." - Fielder Capital (2025) March Madness Comes Early March Madness came early this year. In the last two weeks of January, we saw a year's worth of news. Big news. On tariffs, on immigration, on crypto, on DOGE, on Saudi investing big in the US. For us, though, DeepSeek was the big shocker. Has Big Tech overinvested in capital expenditures for AI? Will we really need as much electricity as many (including us) have assumed in the decade ahead?   Last Friday we sat down to discuss what really matters in all this for our clients. You can watch or listen here ... We discuss ... DeepSeek - How does this impact our electricity thesis? Tariffs and trade deals - What are the economic implications?  Re-shoring US manufacturing - What are the opportunities?  Most contrarian ideas -  What popular investments do we predict do worst in 2025? The landscape is shifting dramatically. Our goal is to evolve and adapt accordingly. If you want help navigating this with your portfolio, let us know.  Yours in the Field,  Frank Byrd, CFA Steve Korn, CFA IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

Good Times? Are these good times or bad times? Depends on whom you ask. Wages are up 23% since just before COVID. Yet, this hasn’t kept pace with inflation in rent, gas, and food prices. Meanwhile, the stock market and home values are up over 60%. Hence, there are two different economies coexisting. Homeowners and investors want to party like it's 1999. Everyone else feels like it's shakedown 1979. Quantum Economics Governments want – and need – higher asset prices. Rising stock markets and real estate prices help keep the economy growing, employment full, and tax collections high. The risk is that the easy monetary and fiscal policies employed to support asset prices can ultimately lead to consumer price inflation, thus hurting those without assets. It is a tough balance that policymakers aspire to sustain. We believe they will lose balance from time to time. When that happens, we believe they will choose to do what they have done in the past: step in and reinflate asset prices. We need to get used to Quantum Economics, where our economy can be in two places at the same time. Approximately 45% of the consumption in our economy is driven by the wealthiest 20% (those who own assets like homes and stocks).* If you’re “wealthy” (meaning you own your home and stocks), you’re way ahead. If you had a $1M stock portfolio just before COVID, it is now worth ~$1.7M. If your home was worth $500K before COVID, it’s now worth ~$750K. Combined, you’d be over a million dollars richer than just four years ago. Do you think that would make you more inclined to take a vacation? Or buy a new car? Maybe a new home? If you’re the average consumer, you’re not getting ahead.  If you’re less than average (meaning in the bottom 50% of wage gains), you’re losing ground. For those without assets, there is no wealth effect tailwind, just higher costs.  Wealth effects matter. The Fed and the Treasury are well aware of this - especially of the fact that it works both ways. Any large and sustained drop in asset price will hurt consumption and thus the economy. Another worry is that lower asset prices can hurt tax collections (due to lower capital gains taxes). California felt this acutely when state income tax collections fell 25% following 2022, when stock markets fell and venture capital IPO’s dried up.  A fitting analogy is quantum mechanics, the theory that a subatomic particle can occupy two locations at once. We believe today’s economy is in two very different places at the same time. Inflection Point Fed Chairman Jerome Powell was in Nashville last week for his first public speech since the Fed’s big pivot last month when it cut interest rates by half of one percent. That was the first time in over four years the Fed has cut rates. This marks an inflection point. We believe that global liquidity is poised to expand materially. Powell now believes the economy is robust, and barring any change in the data, the Fed likely cuts interest rates another half of one percent by year end. The yield curve implies further cuts in the year ahead. We believe other central banks across the globe will follow. Indeed, Switzerland, the UK, Canada, Sweden, and New Zealand already have. Even more remarkably, China announced a large stimulus plan two weeks ago encouraging domestic consumption and even stock buybacks (wow).This marks a significant inflection point in global liquidity, from contraction to expansion. It is a positive for markets and asset prices globally. Based on our observations above, we believe this is early stages. Is this good public policy? Will there ultimately be unintended consequences? That’s a discussion for another day. What to do?  Simple: avoid what governments seek to deflate (cash).  Own what they seek to inflate (assets). As long as liquidity continues growing, it is likely good for asset prices (stocks, real estate, commodities, gold, etc.). We’re available to address any questions you may have, as always. Yours in the Field,  Frank Byrd, CFA Steve Korn, CFA   *According to Ellen Zentner, Morgan Stanley’s Chief economist.  IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

Happy Friday! Last week Kirk Kerkorian passed away. If there’s anyone who understood risk and reward, it was surely him. (He was one of the builders of modern Vegas.) In reflecting on what made him a great investor, I was drawn to this comment he made back in 2006 when he decided to cash in his chips on his investment in GM. (Recall what happened to that “blue chip” in 2008.) Amen of the Week "I like to gamble. But I stop gambling when there's no chance to win." - Kirk Kerkorian, Entrepreneur and Investor Wall Street Journal, Dec. 2, 2006 Might some, if not most, of today’s artificially inflated markets share this same dynamic? Chart of the Week With Kerkorian's comments in mind, I built the following chartto illustrate how the upside/downside of investing in long-term bonds has changed so meaningfully over the years, especially after 2008. Who wants to bet that Kerkorian’s estate was holding a lot of long-term bonds? Not me. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

"Keep some perspective. Not every problem is a Crisis, Plague, Epidemic, or Existential Threat, and not every change is the End of This, the Death of That… Don’t confuse pessimism with profundity: problems are inevitable, but problems are solvable... It’s not just a rhetorical aspiration to say that ideas can change the world; it’s a fact about the physical makeup of brains.” - Stephen Pinker, Enlightenment Now Science Fiction Fact Amidst all the negative news on Covid, it is worth pointing out that the US economy (GPD) and stock market (S&P 500) have reached new highs toward the end of 2021. Granted, much of this is likely driven by the near 40% increase in the US money supply (M2) since Covid's arrival, as we noted earlier (" Fun Fact, Serious Consequences "). On a more positive note, there were some remarkable advances during 2021, such as: Nuclear fusion became realistic . The promise of nuclear fusion has long been considered the "holy grail" of clean energy: a virtually limitless source of energy that doesn't produce greenhouse gases or radioactive waste. It is a natural, ubiquitous power source. It is literally what causes the sun and stars to shine. The problem is that fusion has long been technologically impossible, and thus considered a fantasy. That changed in 2021. In August, the NIF set a new record for energy released from nuclear fusion – smashing it’s earlier 2018 record by 23-fold. Then, in September, an MIT-designed project created the most powerful magnetic field in history, thereby removing the greatest barrier to making nuclear fusion a practical reality. Major fusion projects are now under construction in France and China. AI accelerated discovery in life sciences . After finding the solution to "protein folding", one of biology's greatest challenges, Google's Deepmind made its AlphaFold system available - for free - to the entire world. Their team notes, "This breakthrough demonstrates the impact AI can have on scientific discovery and its potential to dramatically accelerate progress in some of the most fundamental fields that explain and shape our world." The world got vaccinated . Within a single year, almost 60% of the global population received a dose of a Covid-19 vaccine (and 50% were fully vaccinated). This astounding achievement follows 2020’s breathtaking feat of Pfizer and Moderna developing the vaccines within a single year. These were just a few of the breakthroughs in 2021. There were many others. Heck, Captain Kirk even traveled into actual space courtesy of Jeff Bezos. There will surely be challenges and rough patches ahead, yet we enter 2022 with a hopeful and optimistic perspective. Our New Year’s resolution is to look forward, not backward, and attempt to (prudently) maximize our clients’ lifetime exposure to serendipity. The Fielder team sends its best wishes to a happy, healthy and prosperous 2022 ahead! Cheers, Frank Byrd, CFA Steve Korn, CFA IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

Banks: The New Public Utilities Following Silicon Valley Bank's failure earlier this year, banks have been less willing to make commercial loans. While this poses risk for the economy, there is a potential benefit: as banks retreat, it is opening the door for private lenders to step in and fill the void. Investors in these private credit firms are benefitting from the high interest rates they're charging corporate borrowers.   We recently had the privilege of discussing this dynamic with Apollo's Chief Economist, Torsten Slok. He notes that this window will ultimately close. You can watch or listen here:  The failure of Silicon Valley Bank and subsequent bank runs earlier this year were a shock and embarrassment for regulators and bank management. The not-surprising result is that banks are pulling back from commercial lending. This merely accelerates a trend that was already underway for years before: banks have been less and less willing to hold loans that involve risk.  Commercial Bank Loan Growth Has Slowed   Banks are slowly morphing into quasi-public utilities. Increasingly onerous regulatory capital requirements have made it more expensive for banks to hold commercial loans on their balance sheets.  Private Credit Gone Wild? Skeptics fear private credit. We don't. We believe private credit represents a secular shift in the way that capital is allocated in our economy. It is here to stay. At least until bank regulators change their restrictions on banks holding risk on their balance sheets - if that ever happens. Call us skeptics that governments will ever relent in their growing influence over banks.  No doubt we'll be reading future articles about private credit gone bad. But saying "private credit is bad" is like saying "stocks are bad". Private credit encompasses a wide spectrum: from good lenders making low-risk loans to high-quality borrowers …. to bad lenders making high-risk loans to low-quality borrowers … and everything in between. Selectivity matters.   We believe that a thoughtfully constructed, diversified portfolio of private credit may offer better risk-adjusted returns than the S&P 500 going forward. Sending our wishes for a Happy Thanksgiving.  We are grateful for you, our thoughtful clients and friends.  Yours in the Field, Frank Byrd, CFA        Steve Korn, CFA       IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

"If the origin of the problem was too much debt, how can a policy that encourages the private and public sectors to accumulate more debt be part of the solution?" - Claudio Borio, Head of Monetary & Econ Dept, BIS* Half Right It's lucky that we have thick skin. Last summer, when consumer price inflation was peaking at almost 9%, Fielder said we weren’t concerned about near-term inflation. (See Inflation Head Fake .) Many of you thought we were crazy. Thankfully, we weren’t. Inflation has declined ever since, surprising markets and sending them higher. But our crystal ball wasn’t perfect. We had also predicted that the Federal Reserve would capitulate on raising rates at the first sign inflation was cooling. Fed Chairman Powell ended up having a backbone and remained steadfastly hawkish to clean up the inflation mess (which he helped create). What Now? Though we haven't been worried about near-term inflation, we remain concerned about longer-term inflation. You can get details on why in the following video: Ultimately, we believe that governments are locked into a policy path of "financial repression". Policymakers need to orchestrate artificially low levels of interest rates in order to both inflate asset prices and reduce the interest cost on the federal debt. Otherwise, interest costs would continue to balloon to a level that would crowd out spending for Social Security, Medicare, defense, and other critical needs. It may not be the moral high-road, but for most elected officials, it's the only way to make the math work. If interest rates on US Treasuries remain at ~5%, we project that Washington's cost of servicing its debt will increase to almost 30% of its annual budget. To learn what this ultimately means for investors, you can learn more HERE or by clicking the above video. As always, we welcome any questions or contrary thoughts. Yours in the Field, Frank Byrd, CFA *From BIS Working Papers #353, "Central Banking Post-Crisis: What Compass for Uncharted Waters?" by Claudio Borio. (Hat tip to Ed Chancellor for flagging this quote in his excellent must-read history of interest rates, The Price of Time, Atlantic Monthly Press, 2022.) IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

“Every victory is only the price of admission to a more difficult problem” ― Henry Kissinger   Markets hit new highs recently now that inflation appears to be under control. To Kissinger's point, does a more difficult problem await us? The following three images suggest that could be the case . . . Bank Troubles Last year was a  record  for bank failures -- surpassing even 2008. Somehow this bit of trivia has escaped the broad public's attention. Three of the four largest banks failures in history all happened in 2023. We fear the full ramifications are not behind us. Per the chart below, commercial loans (green line) continue to languish, especially in comparison to growing federal borrowing (red line): Banks are struggling with deteriorating real estate loans on their balance sheet (especially those backing office buildings). Making matters worse, banks face increasingly onerous regulatory capital requirements, which make it more expensive to hold commercial loans on their balance sheets. No surprise, banks have been less willing to lend to businesses. This is a headwind for economic growth.   Debt Doubles Washington is on track to more than double its pre-COVID debt levels within the coming decade: (These are Congressional Budget Office (CBO) forecasts, which we believe are optimistic.)   Crowding Out Finally, it's worth noting that the interest expense on federal debt will soon exceed defense spending according to the Congressional Budget Office (CBO).   As interest expense consumes a growing portion of Washington's budget, important spending could get crowded out - not just defense, but ultimately critical social programs such as Medicare or Social Security.  Steve and I summarize how Fielder is positioning client portfolios given these crosscurrents in this short video: Yours in the Field,     Frank Byrd, CFA                  IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

“Indexing can't work well forever if almost everybody turns to it. But it will work all right for a long time.” ― Charlie Munger ( 1998 ) “If everybody indexed, the only word you could use is chaos... The markets would fail.” ― John Bogle ( 2017 )     A Crowded Trade Markets have a tendency to go wherever they can do the most damage. That’s an old Wall Street adage that comes to mind whenever I notice too many investors sharing the same view. Consensus can be a good thing in science, but it's dangerous in markets. Over the span of my career, I have never seen a more crowded view than: "It is wise to invest in a market-cap weighted index." Does This Make Sense?   Do you believe that Wal-Mart is 4x more compelling an investment than Target? If you owned an S&P 500 index fund, that’s the bet you’d be making. The index is weighted by the market size of each company. Since Wal-Mart is quadruple the size of Target, you’d own four-times as much of it in your index fund.     Do you think the outlook for Home Depot is twice as strong as for Lowe’s? Hope so, considering your index fund owns twice as much of it.   Is Exxon a better investment than First Solar? Maybe you think so. But is it 19x better? That’s the relative size of the bet you’d be making in your index fund.  Is Bigger Better?  Perhaps this weighting would make sense if larger companies outperform smaller ones. But that has not been the case. Historically, the largest companies in the S&P 500 have, in the aggregate, underperformed the other stocks after breaking into the index’s Top 10 ranks.   Naturally, these mega stocks outperform in the years leading up to this zenith, as indeed they have in recent years. Nvidia recently - and briefly - became the largest company in the S&P 500. It was the 12th company to attain this status in history. Looking at the other 11 companies that have reached this zenith in the past (including AT&T, DuPont, Exxon, GM, GE, IBM, and Phillip Morris), it is easy to be skeptical that past outperformance translates into future outperformance. Yesterday’s winners have more often than not become tomorrow’s losers. Nevertheless, many believe that today's largest companies have more enduring competitive moats than their predecessors. Maybe. People used to believe the same about Wal-Mart, IBM, and Intel. But along came Amazon, Apple, and Nvidia. If you compare the list of top 10 S&P 500 constituents from twenty years ago with today's top 10, you'll note that only one has successfully remained a top company: Microsoft. And don't forget that even that company was losing its footing before Satya and ChatGPT came along.   Concentration Index funds have gained substantial share from active managers over the past decade. This has resulted in flows into S&P 500 index funds that are then obligated to buy those 500 constituent stocks. Since the index is weighted by market size, the fund buys more of the largest and more expensive stocks. These fund inflows have driven increased concentration among the largest names. The ten largest stocks in the S&P 500 comprised 34%  of the index as of May 31st, the highest month-end weight in decades. This is why Fielder has tried to avoid market-cap-weighted indexing for our clients where practical. We believe there are better ways to weight a portfolio, such as equal-weighting.  Impact on Markets Steve Korn and I recently interviewed Mike Green, who has done eye-opening research into the the impact that index funds are having on markets. Important stuff. You can listen or watch here... Yours in the Field, Frank Byrd, CFA            IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

Last year was an ugly year in markets. How did Fielder do in navigating it for our clients? More importantly, how are we positioning for 2023 onward? The Worst Year Including the carnage in both stocks and bonds, global capital markets lost more in 2022 than in the 2008 Great Financial Crisis and COVID combined. The blended return for stocks and bonds last year was the worst on record dating back to 1872. That makes 2022 “the biggest outlier year in history,” according to Deutsche Bank’s Jim Reid. Our Hits In navigating 2022, here are a few things we got right: We under-weighted large tech. Our preference for equal-weighting equity index portfolios paid off in 2022. The seven largest stocks in the S&P 500 were down more than 46% on average, while the other ~493 stocks were down just 11% on average. The traditional S&P 500 is market-size weighed, so those seven largest stocks drove a significant part of the index’s 18.4% decline. The equal-weighted S&P 500, by comparison, was down just 11.8%. S&P 500 Divergence Source: Factset, Fielder Capital Group LLC We owned alternatives. Our clients entered 2022 with not only traditional stocks and bonds, but also commodities, natural resource equities, real estate, and alternative investments. These investments bolstered returns, providing a much-needed offset against traditional stock and bond market declines. We shunned long bonds. We’ve been worried about inflation for years, having written extensively on our beliefs that money printing would ultimately have unintended consequences. We had thus in prior years been tilting away from long-term bonds in favor of shorter-term treasuries, floating-rate private credit, and TIPs. These positions helped fortify our client portfolios against the losses in the broader bond markets once inflation arrived. (Believe it not, the Bloomberg Long-Term Treasury Index was down 29% last year). We were NOT worried about inflation (near-term). As investors fretted last summer that inflation was heating up, we said that leading indicators suggested inflation was actually rolling over. For that reason, we said we did not share the markets’ fears over near-term inflation. Rather, we remained concerned about longer-term inflation (unlike markets which price in ~2.2% inflation a decade from now). This view proved correct later in the fall. Inflation has continued to come in lower than the Fed and Wall Street had earlier feared, most recently at just ~2% on an annualized basis. Inflation Rolling Over Source: Factset, Fielder Capital Group LLC Our Misses Hey, we're not perfect. Here’s what we got wrong: We assumed the Fed would pivot sooner. During last summer, we predicted that the Fed would ease up by the fall – just in time for election season – as long as Chairman Powell could point to progress taming inflation. We were wrong. Powell is no Volcker, but he’s shown far more backbone than we gave him credit for earlier. Gold and TIPS were “meh”. For years we have used gold and TIPS (Treasury Inflation Protected Securities) as inflation hedges for most clients. While they performed better than stocks and bonds, neither provided positive returns in 2022. Even though the Consumer Price Index (CPI) leapt higher, longer-term inflation expectations remained low. The Fed convinced markets that it was committed to beating inflation, which lowered demand for inflation hedges. Looking forward, we believe gold and TIPS remain attractive hedges against longer-term inflation (which we believe will likely be higher than markets presume). Aside from these two "macro" misses, there were some "micro" misses. For instance, we were surprised by Bitcoin's decline in the face of inflation's surge. Thankfully, this was a micro issue for most clients. Due to its inherent risk, we had recommended owning no more than a small amount for most clients. Further, Bitcoin remains well above the price when we first recommended it. (Keep in mind: Bitcoin fell ~65% last year, but so did Tesla and Facebook/Meta.) Our Forward View Inflation is not a problem. At least not today. We said that last year, and many disagreed. Recent inflation data continues coming in at a pace below the Fed's earlier expectations. This whiff of good news has been powerful in the face of investor sentiment that is lower today than during even 2008 or COVID. There are some other rays of light: Ukraine is stronger; Putin is weaker. Supply chains are loosening. People are getting back to work – and back to playing. Airports are full. It's no mystery that markets are perking up. Our forward view is shaped by three themes (or “3 Pillars” as we prefer to think of them): Debasement. As inflation pressures continue to ease, we expect the Fed to ultimately return to its earlier playbook (repressing interest rates and monetizing US debt in order to fund Washington’s ballooning deficits). Deficit spending is now annualizing at a run-rate of ~ $2.2 trillion, which is ~10% of GDP. This will get even worse if the economy continues slowing and tax receipts fall. The US Treasury will need to issue a lot of bonds to fund its growing deficits. With China, Russia, and Japan stepping away, who’s going to buy our bonds? The Fed, we believe, will be forced to return to its policy of monetizing Washington's debt to fund its growing deficits. The policy objective is to boost asset prices and lower the real value of our government’s debt. Unintended consequences are a risk and will not be smooth for markets. Infrastructure. After years of under-investment in domestic energy and industrial infrastructure, we observe an inflection point reversing this trend. We believe certain commodities and natural resources will be in short supply as this much-needed investment in new capacity accelerates. Innovation. While the follies of central bankers make us bearish, the sobering progress of today’s innovators make us net bullish in our long-term outlook. The innovation happening today in biotech, AI, blockchain, and new energy has the potential to create material progress and improvements that could potentially dwarf the boom of last half century. (The above images of 3 Pillars were created using the A.I. of DALL-E.) All three themes call for owning assets. In the case of Debasement, certain assets are our best defense against inflation. With Infrastructure, we want to own the natural resources we judge most likely in imminent supply shortages as we rebuild critical capacity. And with Innovation, we aim to own a share of tomorrow’s greatest, world-changing companies. Last year was the worst year of wealth destruction in modern history. None of us enjoyed seeing losses in our portfolios, even if these were just “paper losses”. Nevertheless, we believe Fielder navigated last year comparatively well. We helped clients mitigate losses by balancing portfolios (between playing defense and offense) in ways we judged most prudent. Looking forward, we are enthusiastic about how clients’ portfolios are positioned to benefit from the 3 Pillars of Debasement, Infrastructure, and Innovation. We are humbled by the confidence our clients have placed in us - especially through such a volatile year. It inspires us to work hard to prove that that confidence is well placed. We wish you all a prosperous 2023 ahead. Yours in the Field, Frank Byrd, CFA Steve Korn, CFA IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

Game Over We are witnessing, in real time, policy makers employ a new level of financial activism. Their old toolkit was to lower interest rates to spur economic growth. That no longer works. Hence, they're resorting to radical new tools. There will be consequences -- some intended, some unintended. Now is the time for a rethink of your capital allocation, while markets are high and tax rates are low. Year-to-date, the US money supply is up over 20%, and the Fed’s balance sheet has expanded by 67%. This has helped drive markets higher. The problem is that it makes some formerly "low-risk" investments into high-risk investments moving forward. It is a new game. Investors need to evolve and adapt as a result. What has worked so well in the past several decades may work poorly going forward. This new game has new rules. It requires a new game plan. This 6-minute video highlights a discussion that we had on this topic last week: The Paradox Policymakers have been less tolerant of free markets as the primary determinant of asset prices. Their intolerance intensified after COVID. Capitalism, as we've known it, has changed. Looking forward, we expect capital allocation will be driven less and less by market forces and more and more by federal decree. Not that this will necessarily be bad for securities prices. Money printing and MMT may well propel prices higher (at least in nominal terms). Proponents of such policies claim they have the will and the means to inflate. We take them at their word. Higher market prices will likely come at the "cost" of higher price volatility. As we enter the fall months, we expect heightened uncertainty surrounding the elections, on top of continued anxieties over COVID. Depending on the election outcome, tax laws could change substantially in 2021. This adds another layer of complexity to clients’ capital allocation decisions. We strongly urge you to devote time and attention to your planning well ahead of year-end. Do it now, while markets are high and tax rates are low. Fielder is honored to counsel our clients through these important decisions. As always, please reach out if it makes sense to have a conversation. Yours in the Field, Frank Byrd, CFA, CFP® Steve Korn, CFA Fielder is an independent, fee-only adviser that provides asset management and family office services. Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.

Is the stock market crazy? Many investors are asking that question after the recent rally. The S&P 500 is down approximately -11% year-to-date, having rallied from being down -31% year-to-date as of the low on March 23rd. Over the past twelve months, the S&P 500 is now up +0.4%. The NASDAQ is up +0.5% year-to-date, and believe it or not, it's up a healthy +15% from year-ago levels. Given the damage COVID has wreaked on our economy, it is tempting to interpret this recent strength as crazy. Is it? Could it be a bear-market rally? Time will tell. We have no "edge" on forecasting near-term market moves. Here are four reasons that the market's resilience might not be irrational: 1. There’s less uncertainty. Markets hate uncertainty. There’s lots of it still, for sure. But there is a narrower range of possible futures. 2. Long-term outlook remains good. The stock market’s value is based upon what investors expect companies to earn looking forward. The lion’s share of that value is derived from the earnings in the out-years. Only a small portion of the valuation is derived from earnings over the next year or two. Whatever the risks of COVID in the coming year (or even years), most investors believe the global economy will adapt and ultimately return to pre-COVID levels in the longer-term. (Granted, the mix within the economy will surely shift – for example: less brick & mortar retail, more testing and healthcare services.) 3. The Fed’s new mandate. Apparently, the Fed has expanded its mandate beyond full employment and price stability. Now the Fed appears to be in the business of ensuring market price stability. Investors have observed its unprecedented support over the past several weeks and drawn a rational conclusion: The risk of owning “risk assets” such as stocks and high yield bonds has gone down.* Just this week the Fed announced its intention to buy bond ETFs to provide further support. And perhaps most importantly . . . (drum-roll, please) 4. It’s actually an illusion. Looking through the lens of traditional benchmarks, the stock market looks to have largely recovered. However, the most prominent benchmarks like the S&P 500 are weighted according to market size. This means that the largest companies make up the lion’s share of their returns. The five largest companies in the S&P 500 are Microsoft, Apple, Amazon, Google and Facebook. Together they comprise ~21% of that index. COVID has either not affected or benefited these companies. The stocks of all five are up year-to-date. For the NASDAQ, this concentration is even more extreme: these same five companies make up ~38% of that index. A small handful of companies are thus driving the surprisingly resilient stock market returns of the major indices. A look at all the other companies shows a far different story. The S&P 500 Equal-Weighted index (which balances all 500 stocks equally rather than by size) is down -21% year-to-date, almost twice as much as the traditional S&P 500. The Russell 2000, which is a broad index of small stocks, is down -25% year-to-date. Even worse is the performance of stocks that are both small and cheap: the Russell 2000 Value index is down -35% for the year. What to make of all this? Prices for most stocks are much cheaper than they were a few months ago. That does not make them necessarily good investments in a post-COVID world. It does, however, make for a more attractive hunting ground. Last week Steve Korn and I discussed our evolving views in light of this new environment, which you can watch or listen to HERE. We welcome any additive or contrary thoughts from our clients and friends (our most valuable resource). Very Best, Frank Byrd, CFA, CFP® Fielder is an independent, fee-only adviser that provides asset management and family office services. Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.