Like the markets, the Pittsburgh weather has been inconsistent as we enter the spring season. Although the sun will start consistently shining soon, we do not know when the cold and bitter rain will end (for our clients in the south and west, please send realtor recommendations in your area =).
The quarter could be summarized as follows:
- Recession fears (early January)
- Recession fears overblown? (late January to mid-February)
- Is inflation going away? (mid-February - early March)
- US & European banking fears (mid to late-March)
Despite negative headline news, the S&P 500 still finished up over 7% and the US Bond market (as measured by the Bloomberg Barclays Aggregate Bond Index) was up nearly 3%. Growth stocks dominated value stocks (primarily driven by underperforming bank stocks) and international developed markets also posted gains over 8%.
Here are our quick takes and views on the current market environment:
The fear we are seeing is likely contained to a few bad apples. The issues related to Silicon Valley Bank were related to the mismanagement of their own balance sheet and the unique makeup of their client base.
Credit Suisse had been chronically mismanaged for years and will likely be used as a subject of how not to run a business in college case studies for years to come.
The worst appears to be over, but inflation will likely remain elevated in the near term.
The market expects the Fed to raise rates by another quarter point in May and leave rates unchanged until late in the year. The Fed could then start cutting short-term interest rates later in the year. Currently short-term treasuries have a higher yield than long-term treasuries, meaning the bond yield curve is inverted. What the Fed ultimately decides will depend on the future path of inflation, employment, and economic growth.
A recession is typically defined as two consecutive quarters of negative growth (measured by GDP). While the probability of a recession has increased since our last update, it is more important to consider what you are trying to achieve over the short and long-term. It is also one of our primary responsibilities as investors to help navigate and position your investment portfolio to match your risk preferences and time horizon.
Below is a chart showing the S&P 500 performance during and after various recessions. Our thoughts? Patience is typically rewarded.
Authored by Stephen Blahovec and Michael Rausch of North River Wealth Advisors. We are an independent, fee-only financial planning and investment management firm located in Pittsburgh, PA servicing clients locally and across the country. To learn more, contact us here.
This content is developed by North River Wealth Advisors from sources believed to be providing accurate information. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.