Market Commentary

We relayed a note in late February discussing the war in Ukraine, our thoughts, a few points on markets, and associated historical reactions to similar acts between nations. We will not touch on it again here but will repeat our sentiment. The loss of human life that has occurred and may continue in the coming months or even years is extremely tragic, and we feel for everyone who will be directly impacted. Discussing markets during a period of war is always secondary, but as stewards of capital for our clients, it remains a necessity. Recap It was the worst quarter…

Recap A reasonable person could sit here at the end of 2021 and have a sense of Groundhog Day – like last year at this time, COVID is dominating headlines and impacting the way we live, work, travel, and socialize. On the positive side, we also have equity markets generating robust performance. In fact, in 2021, the S&P 500 returned greater than 15% for the third straight year – you have to go back to the dot-com boom in the late 90s to see such consecutive performance, and besides then, no other time since 1940. We will recap some of…

In this letter: We take a break from the U.S. to focus on markets overseas by looking at a dated jigsaw puzzle. A discussion of how some rules of thumb need to adjust with changing market composition. China, and how it may not fit several emerging market prerequisites (growth and demographics). Europe and Japan are changing, just very slowly. A few notes on the debt ceiling and inflation. In my experience, kids love a geography puzzle. Give them a jigsaw of the U.S. and it will not take long for them to point to Florida, where the alligators live, Arizona,…

In this letter: Monetary and fiscal policy remain very accommodative, translating to elevated valuations across markets. A new industry catchword for 2021. Risk tolerance should not be forgotten when times are good. As financial asset classes continue to exhibit strong risk on characteristics, there is emerging tension between the fuel supporting such risk taking (strong) and the valuations of both equities and fixed income (expensive). The Federal Reserve remains exceedingly accommodative, both by keeping rates at zero and by purchasing vast amounts of the issuance of Treasury bonds. The market seeks clues as to when these stances will change via…

In this letter: A discussion of Modern Monetary Theory. While interest rates are back up, the rebound in risk-assets continues domestically and abroad. Global context regarding debt, deficits, interest rates, and inflation. Re-reading what we wrote last year at this time, it is amazing to see how much has changed, but also more importantly, how much has stayed the same. We ended last year’s letter with this: “We are entering a unique period where it is getting harder to lean on precedent. Like it or not, the fiscal and monetary policies enacted today, and the associated backstopping of the economy…

In this letter: As 2020 ends, the contrast between solid financial markets and the ravages of COVID-19 continued Both equity and fixed income markets saw noticeable regime changes during the year The classic 60% equity/40% fixed income portfolio just had its best two-year return since 1997-1998 A year-end investment commentary typically talks on performance, valuations, levels of market indices and rates, to name a few common topics. It would be tone deaf of us, however, not to acknowledge upfront the profound impact the COVID-19 pandemic has had on all of us and our families: the headline number of cases, hospitalizations,…