Happy Spring from Veritas!
As we enter the 2nd quarter of 2023, here is the latest news, on-going developments, and 1Q market performance…
- In the news:
- The Federal Reserve (The Fed) has reduced the size of rate increases in 2023, having increased rates by just 25 basis points in both meetings during 1Q23. This was after seeing further evidence that inflation is coming down. The Fed has pledged to keep raising rates to keep combating inflation while hoping to avoid a prolong economic recession. Market expectations for the next Fed meeting in May 2023 point to another 25 basis hike.
- Regulators had to take control of two regional banks in March, which concerned investors about our banking system. Those worries have abated since the US Treasury backed all deposits in those banks and reported that our overall banking system is well-capitalized and liquid.
- In 2023 markets have reacted favorably to softening inflation and supply chains normalizing.
- Developments to monitor:
- The Fed and Inflation – investors are closely monitoring the Fed for any signs that they will stop raising rates altogether, and eventually reverse course when they feel inflation is under control.
- Recessionary concerns – if the economy slows too much we could enter a longer-than-expected recession. With the economy showing resilience in many areas, it is expected that we can “handle” a short or mild recession.
- Earnings – 1st quarter earnings season kicks off soon and will be closely scrutinized for signs if the resulting valuations can support a continuation of 1Q23’s market strength.
- Market Performance for 1Q23:
- Equity Benchmarks 1
- S&P 500 (US Large Caps): +7.5%
- Russell 2000 (US Small Caps): +2.7%
- MSCI EAFE (International Developed): +85%
- Fixed Income Benchmarks 1,2
- ICE BofAML US CORP & Govt 1-10 Yr A-Rated (Bonds): +2.3%
- Barclays US Aggregate Bond Index (Bonds): +3.0%
- Alternative Investment Benchmark 3
- HFRX Global Hedge Fund Index (Alternative Investments): +1.0%
- Equity Benchmarks 1
Although it may not seem obvious, we are encouraged to see stronger and broad-based market performance to start 2023. Looking ahead, I will continue to monitor all market and economic developments with a particular focus on the Fed and inflation levels, and make adjustments as needed.
As always, thank you for your trust and confidence in our Team!
1 Source: Blackrock
2 Source: ICE Index Platform
3 Sourced: HedgeFundResearch.com (Returns through 2/28/23)
“The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not developed as predicted and there can be no guarantee that strategies promoted will be successful. No reader should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence.” Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results.
