Market Commentary: 1st Quarter 2023

Stocks were up across the board in the first quarter.  Large domestic companies, measured by the Standard & Poor’s 500, gained 7.0%.  The Russell 2000, reflecting smaller US stocks, advanced 2.3%, and the Nasdaq Composite, heavily weighted in technology companies, was up a whopping 16.8%.  Foreign firms, generally speaking, moved higher as the Dow Jones World Index (ex US) rose 5.7%.


The year began with largely upbeat investor sentiment.  Inflation seemed to be subsiding and many believed the Fed would shift to an easing of monetary policy.  Demand for equities increased.  But as positive economic data began streaming in, the old adage “good news is bad news” took hold, with investors betting the Fed would indeed have to continue raising rates, pumping the expansionary brakes.  Add to that the surprise failure of a couple of sizable banks, and demand for stocks was curtailed.  The regulatory response to this potential banking crisis, like it or not, seemed to calm investor fears.  The FDIC fully backing all depositors, along with the Fed’s new Bank Term Funding Program, seemed to assure investors that a full-blown banking crisis had been averted.  However, investors would have to expect lending standards to tighten.  As such, a more stringent lending environment would be doing much of the Fed’s heavy lifting for them, alleviating the necessity for additional rate increases.  So now, bad news is good news?  Investors could not be faulted for claiming whiplash, as economics is certainly a soft science.  If nothing else, Q1 performance demonstrated impressive market resiliency.


What advice do we have for the long-term investor?  With today’s 24/7 news cycle, we are all constantly bombarded with the latest “breaking news.”  And you don’t have to pick up a newspaper or turn on the TV – it’s delivered straight to your smart phone.  Most of these, especially in the economic and financial arenas, are overly sensationalized pieces designed to capture eyeballs and sell advertising.  The problem for investors is not a lack of information, but rather a firehose of questionable, potentially harmful snippets encouraging short-term action.  The successful long-term investor resists the temptation to react to the news of the hour.  Superior long-term performance and the achievement of long-term financial goals are byproducts of adhering to proven wealth management fundamentals.  This includes maintaining one’s thoughtfully structured portfolio with a Target Asset Allocation set to deliver desired long-term returns with commensurate volatility characteristics.  Somewhat boring?  Perhaps.  Effective?  Definitely.


In these times of tumultuous market conditions, it is helpful to stay close to your trusted fiduciary advisor.  Please know that we welcome your calls, emails, texts, etc.  And, as always, we adhere to our discipline of strategic asset allocation and style diversification; a strategy designed to mitigate overall portfolio volatility and enhance long-term returns.