1Q23 Quarterly Letter

After a grim 2022, stock and bond markets provided a reasonable start to the year despite the unforeseen swoon in the banking sector that muddies the picture going forward as it relates to both the impact of tighter lending conditions for businesses and consumers and the Fed’s next moves. Perhaps not surprisingly, equity and fixed income markets appear to differ in their views, with equity investors being more sanguine/optimistic than bond investors.

Thus far, the economy appears to have weathered the most rapid Fed rate hikes in history with only a hiccup, but it remains to be seen if deeper and more profound effects will be revealed. At the very least, we believe that the Fed has been forced to add a third consideration to its twin mandates of managing inflation and employment—financial stability. Further, geopolitical tensions, weakness in Europe, a continuing war in Ukraine, and a looming debt ceiling provide additional fodder for an uncertain and likely volatile remainder of the year.

For our latest economic and market insights, download our 1Q23 Quarterly Letter.