The first quarter began in volatility for the markets, as many growth stocks declined 10-12% by late February. Overall, this quarter reinforced the value of broad, global diversification and unemotional, disciplined rebalancing.
Our 1st Quarter Newsletter is linked below for your consideration. Please review this document further for more information on economic and market performance, the effects of inflation, and the rising interest rate environment.
It is worth noting that the failure of Silicon Valley Bank and Signature Bank were not systematic banking industry problems, but rather a result of 90% of the deposits at these banks exceeding FDIC insurance limits, and a high industry concentration to cash-demanding venture capital and crypto firms.
Historically, both the economy and the stock market experience natural, yet unpredictable, economic cycles, expanding for 8 out of 10 years and contracting for 2 out of 10. When wages and prices soar, the Fed raises interest rates to slow these down. As the Fed slows the pace of their rate hikes, we will look to lengthen the duration of our bond portfolios to lock in higher yields for longer periods of time.
The economy as a whole, with rising consumer spending, normalizing supply chains, and a tight labor market, is still strong. As interest rates rise, short-term bonds continue to hold up better than long-term bonds. Many short-term bonds are now paying over 4%.