Third Quarter 2023 Newsletter

Market Commentary

The majority of major asset classes and portfolio asset allocations realized negative returns in the third quarter of 2023. The exuberance that has prevailed since late 2022 pulled back as it has become apparent that inflation remains persistent and the hope for return to an easing of overnight interest rates is a long way away (in other words interest rates are likely to remain higher for longer).

Our only surprise to this was the fact that it took so long for many to realize that the markets have structurally changed over the past 24 months with the global cost of capital having repriced materially higher. Our position that the hope for aggressive rate cuts was overly optimistic and likely to disappoint has been somewhat validated yet we continue to operate cautiously and carefully, maintaining the same consistent discipline around our portfolio construction process and market positioning.

We continue to view the credit side of the capital structure as being more attractively priced than equities and would rather be a lender to certain asset classes than an equity investor. Our focus remains on protecting capital, avoiding excessive drawdowns, and allocating capital at the margin to stable investment strategies providing healthy combinations of lower volatility, income, diversification, inflation protection, and overall risk mitigation. We are excited about the modest adjustments we have made to client portfolios over the past year and plan on writing about some of those in more detail with the year-end review.

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.

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