Much of our time here at Nottingham is spent working with our clients with an eye to the past, examining what happened to portfolios over the last quarter, last year, or the past 3 to 5 years.  While we consider it time well spent, ensuring we stay on the same page with our clients, focusing on the past does often bring into play what behavioral psychologists refer to as hindsight bias.  This can be a fairly common phenomenon that causes one to think they can accurately predict market movements before they happen, and can often lead to ill-advised decision making.  For instance, when reviewing portfolio returns for 2022 we might hear, “Gosh, I just knew the market was going to fall”, or “This decline is going to continue for some time, I just know it”.  The less technical term for what we’re talking about here is the “shoulda, woulda, coulda” syndrome. 

While studying the past is indeed valuable, and crucial to understanding how markets can behave, it is the study of the future that equally informs our decision making process here at Nottingham.  As we go to press here in Q4, there is little we can do about the dismal returns across asset classes thus far in 2022.  It truly is a year for the record books in many ways, few of them positive.  And, as much as this year’s results may bias us towards adopting a more conservative outlook, we can’t help but think there are areas of the market that look historically cheap, and many areas that are cheap-er than they have been in some time.  Therein lies the challenge for investors today: in the face of disappointing results thus far in 2022, do we have the courage to invest in areas like Europe or the Far East, where valuations are incredibly attractive, but the news is nearly all bad??

Or, should we hunker down, conserve our cash, and wait until the market gives us the “all clear” signal?  While safer, the problem with that is there is no “all clear” signal for investors.  Successful investing often requires a degree of uncomfortableness while one is putting money to work.  Personally, and based upon my 25+ years in the bond business, I think 10-year AA-rated municipal bonds yielding 4% (tax-free remember!) are very attractive.  The yield on those securities just a year ago was roughly half that!  However, if inflation stays hot, the yield on that bond might rise to 5% over the next 6 to 12 months.  How would I feel then if I bought that bond today?  Should I wait to find out, only to possibly see the yield fall again to 2%?  Damocles should be so fortunate!

Seriously, though, these are the decisions we face and discuss and debate every day here at Nottingham.  Only time will tell if our timing was good, but as students of history we can at least make informed and prudent choices.  Our mandate as fiduciaries demands it.

So, with that said, we turn our attention to the future and the chart on the accompanying page courtesy of our friend at Research Affiliates.  This snapshot, taken from their (very robust) interactive website, looks at expected 10-year return and risk characteristics for multiple asset classes, based on their assumptions and inputs.  There are many firms that do this, including Nottingham, but I like their framework and straightforward charting functionality, not to mention their optimistic estimates for future returns from here.  As evidenced in the chart, return and risk are most often directionally correlated – the more risk one takes, the higher the return expectation should be. Looking at the chart, notice the possible range of outcomes for investors across various asset classes, as well as multiple diversified portfolios.  As expected return increases (y-axis), the volatility associated with that return also increases (x-axis).  Despite illusions to the contrary, there is no free lunch.

Source: Research Affiliates

If we turn our attention to the top right quadrant, we see noted in red EAFE (that’s Developed International), EM Equity (Emerging Markets) and US Small (domestic small-caps), as three asset classes that in Research Affiliates estimation should earn 10%+ nominal returns over the next decade.  In the bottom left quadrant, we see “USA”, that’s domestic cash, earning about 2% per annum.  In between are diversified portfolios, similar to what we manage here at Nottingham (and in fact, we occasionally overlay our strategies on this chart and they line up as one would expect).  Somewhat consistent with the chart, Nottingham has touted US Small cap as our “best idea” over the past few months, and continue to think they’re cheap on a valuation basis.

The takeaway I would like our readers to glean from this is, based upon valuations today, and estimates for future global growth, equities may provide investors with historically solid returns in the years ahead.  Secondly, given geopolitical uncertainties, as well as inflationary challenges here in the US, diversification will likely reward investors handsomely over time.  All the negative news we read about every day (inflation, war, inequality, pandemic, geopolitics) in theory gets incorporated into stock prices in real-time.  Thus, we can assume that all the “bad news” is priced in.  What would happen to stock prices if earnings hold up better than expected?  What if inflation has peaked and is poised to start falling?  What if growth slows to the point where the Fed needs to cut interest rates in 2023?  The answers are all unknowable at this point, but also NOT priced into stocks!  In other words, a little good news could go a long way.

So, as we review past performance and discuss asset allocation, it’s important to try and keep an eye towards the future.  We may not have seen the bottom yet for equities (or maybe we have).  Interest rates may not have peaked yet (or maybe they have).  Either way, the future prospects for well-diversified portfolios remain far better in our estimation than at any point in the past few years due to the extreme valuation adjustments we’ve experienced.  Volatility may not ebb any time soon; however, for the bold long-term investor, we feel both stocks and bonds are offering a more compelling entry point than we’ve seen in recent memory.

We recognize that “hope” is not a very compelling or viable investment strategy.  Experience dictates that investors should follow a sound and detail-oriented financial plan in order to increase the odds for success.  Courage and acumen are two key components to achieving that success.  Nottingham’s investment strategies and financial planning tools are designed to help our clients improve their odds of achieving their long-term goals. Please let us know how we can help you, as we navigate through this volatile time together.

Larry Whistler, CFA

Larry joined Nottingham in 2006 and heads the Investment Policy Committee, along with portfolio and relationship management responsibilities. He brings over 32 years of investment experience to the team. Prior to joining Nottingham in 2006, Larry worked as an independent RIA for two years and, before that, spent a decade as a bond trader for Merrill Lynch Capital Markets in Los Angeles and New York City.

Nottingham Advisors offers both institutional and individual clients experience, sophistication, and professionalism when helping them achieve their goals. With over 40 years of serving Western New York and clients in more than 30 states, Nottingham tailors each solution to fit the specific needs of each client.

For more information about Nottingham’s offerings, visit or call 716-633-3800.

Nottingham Advisors, LLC (“Nottingham”) is an SEC registered investment adviser located in Amherst, New York.  Registration does not imply a certain level of skill or training.  Nottingham and its representatives are in compliance with the current registration and notice filing requirements imposed upon SEC registered investment advisers by those states in which Nottingham maintains clients. Nottingham may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. For information pertaining to the registration status of Nottingham, please contact Nottingham or refer to the Investment Advisor Public Disclosure Website ( Any subsequent, direct communication by Nottingham with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

This newsletter is limited to the dissemination of general information pertaining to Nottingham’s investment advisory services.  As such nothing herein should be construed as the provision of personalized investment advice. The information contained herein is based upon certain assumptions, theories and principles that do not completely or accurately reflect your specific circumstances.  Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Adhering to the assumptions, theories and principles serving the basis for the information contained herein should not be interpreted to provide a guarantee of future performance or a guarantee of achieving overall financial objectives. As investment returns, inflation, taxes and other economic conditions vary, your actual results may vary significantly. Furthermore, this newsletter contains certain forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their dates.  As such, there is no guarantee that the views and opinions expressed in this article will come to pass. This newsletter should not be construed to limit or otherwise restrict Nottingham’s investment decisions.

This newsletter contains information derived from third party sources. Although we believe these third party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein, and take no responsibility therefore. Some portions of this newsletter include the use of charts or graphs. These are intended as visual aids only, and in no way should any client or prospective client interpret these visual aids as a method by which investment decisions should be made.  We have provided performance results of certain market indices for illustrative purposes only as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.  It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any benchmark index. A description of each index is available from us upon request.

Investing in the stock market involves gains and losses and may not be suitable for all investors. Past performance is no guarantee of future results.

For additional information about Nottingham, including fees and services, send for our Disclosure Brochure, Part 2A or Wrap Brochure, Part 2A Appendix 1 of our Form ADV using the contact information herein.