2023Q1 Market Insights: Navigating Volatility and Positioning for Success
3min video
💰💥 The past quarter brought market volatility, but we're staying the course and positioning ourselves for success. 🔍 Keep an eye on the disconnect between inflation and rate cut expectations. #marketvolatility #investmentstrategy #inflation #ratecuts
Video transcript:
Let’s talk about what's been happening in the markets over the last quarter, our general positioning, and how we're set up for this quarter. The last quarter was a bit of a rollercoaster ride, with a rally in January, we gave a good chunk of that back in February, and then we saw more risk-oriented assets rallying in the last week of March with the sentiment on banks stabilizing.
But there's still a disconnect between sticky inflation and market expectations of rate cuts. Even though the Fed's new forecasts show a recession this year, inflation is set to remain far above its 2% target. This means we can’t expect the Fed to come to the rescue with rate cuts even as the economy contracts until inflation is under control. In terms of performance, you can see the range and YTD numbers for various asset classes on this chart. Most notably, the Nasdaq had its best quarter in nearly three years, while the yield on 2yr Treasuries had almost a schizophrenic type behavior over the quarter by hitting a 16-year high in early March but then steading around 4.0% in late March - about 1 entire percentage point below its high.
As for our general positioning, we made some changes to our portfolio to reflect the times of uncertainty we are in right now by upgrading the overall quality and resilience. We did this by reducing our exposure to certain stocks and types of credit and rotating out names with the most operational risk embedded in them. We also maintained an overweight duration, which means we looked to have investments with a longer-term view, given the potential for a declining interest rate environment. We reduced our exposure to US small caps and momentum-oriented stocks and focused more on growth and international developed market stocks – which paid off.
So this overall trade rationale was based on recent events showing us the real-world practical consequences of rapid financial tightening. The collapse of sizable US regional banks highlighted the risks associated with these actions. When you raise rates this fast, things tend to break - so we took a more defensive approach by reducing the number of stock bets to be less sensitive to volatility. I hope these changes have helped to strengthen our portfolio, and I’ll obviously continue to monitor the markets closely to ensure we're well-positioned for any future developments.
So, that's a quick summary of what's been happening and how we're set up for this quarter. Individual results may vary, and this video is not intended as investment advice. - investors who feel at least have a rough understanding of what's happening in the markets are much more likely to stick to their long-term financial plan than those who do not. If you are a client of BWM, you should receive your performance reports soon, don’t hesitate to reach out if you want to get into the weeds on your portfolio.
We're ready for whatever the markets throw at us next; thanks for watching and staying on point! https://www.barnhartwealth.com/disclosures-disclaimers
https://awealthofcommonsense.com/2023/02/deconstructing-10-20-30-year-stock-market-returns/
