Patient Capital Management is a Baltimore asset manager founded in 2020 by Samantha McLemore, CFA — Bill Miller's long-time co-manager (working together since 2002, running the flagship Opportunity Equity strategy since 2014). Continuing the Miller-school contrarian tradition, it practices "time arbitrage": exploiting behavioral mispricing to concentrate in controversial growth names (tech, healthcare, Bitcoin-related) at deep discounts to intrinsic value. Its site preserves Bill Miller's complete 1995-2022 market letters, alongside ongoing quarterly letters and webinars.
This report covers what happened in financial markets during the third quarter of 2022. The big story: the Federal Reserve kept raising interest rates aggressively to fight inflation, which caused stocks, bonds, and commodities like oil and gold to fall, while the U.S. dollar surged. For everyday investors, this means markets are pricing in a recession, so it's wise to be cautious—avoid assets sensitive to rising rates, watch small-cap and growth stocks, and be aware that a strong dollar can hurt overseas investments. Worth a read because it uses clear data to show how different assets actually performed.
This report discusses the backdrop of heightened market volatility in the third quarter of 2022. The core view is that the Federal Reserve's aggressive rate hikes (the third consecutive 75-basis-point increase, bringing rates to 3.0%-3.25%, with expectations of exceeding 4.0% by year-end) have led t
This section reviews the market's volatile trajectory in Q3 2022, which first rebounded and then hit new lows amid sharp fluctuations. The core backdrop is the Federal Reserve's third consecutive 75-basis-point rate hike, bringing the target range to 3.0%-3.25%, with the dot plot indicating year-end rates exceeding 4.0% (the highest since 2007), as the market prices in a "hard landing." Although inflation has eased from its peak, the August CPI remained elevated at 8.3%, near levels not seen since the early 1980s.
The author argues that the market is currently pricing in a "hard landing," with many investors viewing the Fed's rate hikes as overly aggressive. The report implicitly suggests that despite declining inflation, recession fears are spreading, commodity prices are beginning to fall, and the market has yet to bottom. Counterintuitive observations include small-cap stocks (Russell 2000) outperforming large-caps, and growth stocks finally beating value stocks, though both declined.
Comparative Data Table:
| Asset Class | Q3 2022 Return |
|---|---|
| Nasdaq Composite | -3.9% |
| S&P 500 Index | -4.9% |
| Dow Jones Industrial Average | -6.2% |
| Russell 2000 (Small-Cap) | -2.2% |
| Russell Midcap Index | -3.4% |
| Russell 1000 (Large-Cap) | -4.6% |
| Russell 1000 Growth Index | -3.6% |
| Russell 1000 Value Index | -5.6% |
| Barclays Long-Term Treasury | -10.1% |
| Barclays US Aggregate Bond | -4.8% |
| WTI Crude Oil | -24.8% |
| Gold | -8.5% |
| Bitcoin | +3.7% (YTD -55.3%) |
| US Dollar Index | +7.1% (YoY +19.0%) |
The report does not mention specific companies, focusing instead on index and sector performance. The asset classes covered include: