First Quarter 2023 Newsletter

Market Commentary

Most asset classes and portfolio asset allocations realized positive returns in the first quarter of 2023. On the surface things may seem well, but below the surface there is instability. While it is always nice to realize positive returns, Q1 headline performance covers up major day-to-day volatility in the financial markets. During the month of March two US regional banks were closed by the Federal Deposit Insurance Corporation (FDIC). Also Credit Suisse, a global systemically important financial institution, was sold for pennies on the dollar to UBS, a multinational investment bank based in Switzerland, in order to avoid insolvency.

Most of the enthusiasm for both equities and fixed income can be attributed to a hopeful view by the markets that central banks, led by the US Federal Reserve, will not only stop raising interest rates but will in fact begin aggressive rate cuts sooner rather than later. We view this positioning as overly optimistic and likely to disappoint given the economy’s still (too) high levels of inflation. In addition, not enough consideration is being given to the negative impact on the economy as credit to borrowers becomes less widely available.

Nothing material has changed with respect to our portfolio construction process and market positioning. We maintain the view that most (but not entirely all) available investments offer more risk than potential reward. The focus for us remains conservative and stable investment strategies that provide meaningful combinations of lower volatility, income, diversification, inflation protection and overall risk mitigation.

Year-to date performance and risk of Multi-Asset Reference Portfolios, for comparison, have been updated as follows:

If you are looking to compare the performance of your portfolio to its proper Reference Portfolio, most clients will fit into either the Moderate or the Balanced category.

We would like to thank you for the continued support and trust you have placed upon us as stewards and fiduciaries of your long-term investment capital.

Download the complete First Quarter 2023 Newsletter: