Quality Q1

April 03, 2023

I’m not sure we could’ve asked for a better ending to the first quarter this year.  With January off to a rocket of a start, then February flailing around, THEN March closing the quarter with the S&P500 up 7% and the Bloomberg Aggregate Bond Index up over 2.5%, it sure was a wild ride.  There was so much news in the last quarter that it seemed like the market couldn’t find direction for some time.  The bond index up over 2% in only one quarter was a welcome relief to any mixed portfolio.  I’d be happy with squeezing out a few percent over an entire year so let’s hope this pattern holds.  If you recall last year (yes, I know you do), it was down around 13%, which is unprecedented since being tracked starting in the 70’s.  If we could go another 50 years without seeing that again, I’m on board.

Banking issues made quite a splash in the headlines.  Silicon Valley Bank (and a couple others) failing caused the government to step in and help the situation.  You may not recall, but many investors thought the Fed was going to raise rates by 0.50% before that happened.  However, the entire mood seemed to have been changed after that, and they only raised rates by 0.25%.  I think the Fed is extremely close to being done.  If we see additional bank failures, they might even lower rates quicker than anticipated.  That would be an extremely warm welcome to both the stock and bond markets.

When we get good run ups like this, I’m always hopeful that a FOMO (Fear Of Missing Out) effect takes place.  This happens when investors that moved to the sidelines (or held off on investing) decide that they don’t want to miss out on the upside and start putting money into the markets.  Because of this, they tend to invest very quickly at the same time.  For all of us that held on during the volatile days, it sure feels good to get big up moves as a reward.  Of course, there is the extra volatility that comes along with it, but if that means we get great returns, then hopefully it’s been worth it.

As this year has now started out so excellent, I wouldn’t be surprised to see a pullback in April or May sometime.  As investors continue to digest whether they need to follow the Federal Reserve or Corporate earnings, we’ll continue to see some more volatility—especially in the near-term.  That will all work itself out as the Fed meets again at the beginning of May.  After that I’m hoping to see the final half of the year based solely on corporate earnings…fingers crossed.

I hope you have an excellent Spring, whether it happens to be boating, gardening, camping, power walking, and all else that comes along with the new green of the season.

Thank you for your continued trust in us!

Larry Mroczkowski


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