Market Update – April 2023

The period of easy money, and the subsequent Federal Reserve monetary tightening to reverse that condition, finally reached a crescendo the first quarter of this year. The highly visible collapse of major banks was reminiscent of similar cycles in history, such as the Bear Stearns collapse in 2008 and the meltdown of the Long-Term Capital Management hedge fund in 1998. Fortunately, markets recovered from both.

It is no secret the current events of the world are driving fear into investor mentality. In a recent publication, Birinyi Associates¹ outlined a laundry list of headlines over the last ten months that could have taken the market lower:

• Inflation hit 9%, the highest since 1981
• Federal Reserve Board raised rates to the highest level in 16 years
• Russia invades Ukraine with more than 300,000 casualties
• Russia threatens nuclear war
• Oil prices doubled and then fell 45%
• European natural gas traded 3.5x higher than a year ago
• Risk the United States will default
• Crypto firm turns out to be a fraud on the order of $30 billion
• U.S. and Chinese relations hit an all-time low
• Second and third largest bank failures

There is no question the world seems to be a more dangerous place. Geopolitical and financial events can cause rapid market moves. Volatility is the buzz word of late, and we don’t see a reason for that to change any time soon. But, keep in mind, volatile markets do present opportunities. If you are a long-term investor, buying a stock when the mood is dark and being patient can pay off. This is how value investing is designed to work – patiently waiting for the company’s fundamentals to improve, at which point the share price may reach your objective. Selling individual companies at the target prices enables the redeployment of capital elsewhere. As we ride the waves of volatility in 2023, selling on strength and buying on weakness will be the goal.

For the balance of 2023, it is likely we will hear the word “recession” over and over again. Recession guessing has become a favorite sport since the fall of 2021. Because the term has been over discussed, we are not sure it matters anymore from a market perspective. Trying to forecast the timing or possibility of a recession is a waste of time. What we need to worry about are those things that no one is predicting, as the unknown events tend to be the true market disruptors. It will be important to be nimble.

In short, so far so good for the markets in 2023. Let’s hope the balance of the year will be as good to us as we navigate the inevitable bumps in the road.

Thank you for your trust and confidence in us. We look forward to meeting with you soon.

Glen J. Ness, AIF®, CFP®	Heather O’Hanlon
First Vice President/Investments Portfolio Manager – Solutions Program	Registered Client Service Associate