You’re either runnin’ round in circles or you’re runnin’ out of time. Everybody somewhere either 12, 3, 6 or 9. The times they are a-changin’. We’re here to turn the page. It’s the same old story but it’s told a different way.
"The More Things Change", Bon Jovi
The passage of time brings change and it can seem like the pace of change is always speeding up. Technological change, the speed of information, the speed at which markets digest news . . . it can seem like everything, everywhere, is changing all at once. Consistent with that sentiment, arguably the most impactful event in financial markets in the first quarter of 2023 – the failure of Silicon Valley Bank (SVB) – was notable for how rapidly it happened.
CORE EQUITY COMMENTARY
While the quarter ended with a strong return, intra-quarter moves were more of a roller coaster ride. Coming off a rough December where equities fell across the board, investors were heartened by a favorable inflation report to start the new year, which created some hope that the Federal Reserve would be able to slow its pace of interest rate increases. There also seemed to be an expectation that the peak terminal rate – the rate at which the Fed stops tightening – could turn out to be lower than feared.
FIXED INCOME COMMENTARY
Bonds had a bullish quarter after last year’s historic bear market. Interest rates shifted lower as recession fears have left investors questioning economic and inflationary growth. When rates fall, bond prices rise. The widely quoted US Aggregate Bond Index (“Agg”) climbed nearly 3%. Despite rates ticking down, return expectations for the bond market remain relatively high. The Agg yields 4.4% compared to a 3.2% average over the last 20 years.