THE PAST 12 MONTHS featured some relatively grim milestones—including the highest inflation in four decades and the first truly durable bear market since the Great Recession. That concatenation of bad news poses two challenges for investing pros: They need to figure out where to find positive returns, and they need to talk their clients out from under their proverbial beds. Neither of those prospects daunted our experts. Indeed, they were united in the view that a rough 2022 could pave the way for a better 2023—for stocks, society, and our psyches.
Joining us for this year’s panel were Josh Brown, CEO of Ritholtz Wealth Management; Georgia Lee Hussey, founder and CEO of Modernist Financial; and Savita Subramanian, head of U.S. equity and quantitative strategy as well as global ESG research at Bank of America Merrill Lynch. Edited excerpts from the conversation follow; read more at Fortune.com.
FORTUNE: The markets have been in a long downward trend, and none of us, as adult investors, has ever coped with inflation this high. Did the three of you see this coming?
SAVITA SUBRAMANIAN: We shifted to a fairly bearish outlook by the end of last year. We were starting to see inflation like we’d never seen in our careers, plus the relationship between the market multiple and the inflation rate was completely out of whack. We had an S&P 500 P/E of somewhere above 20, and a CPI that was around 9%; it just seemed really untenable.
It also smacked of 1999–2000. It was the same feeling of: Growth stocks are gonna go up forever, megacap tech is all you want to buy. These companies didn’t necessarily have strong earnings today, but had these promises of fantastic growth. And that was awesome in an environment of very low interest rates. But as the cost of capital rises, it becomes more problematic to take that bet.
I’ve been telling people that market cycles generally are seven to 10 years. And for a while my Spidey sense has been saying: At some point, we’re going to have some kind of correction. We’ve been working with clients building cash positions, building line-of-credit positions, especially for business owners,
