Key Considerations for 2nd Half of 2023

The first half of 2023 was a positive surprise to industry prognosticators, proving two things we tend to emphasize for good reason: (1) It’s never wise to try and predict the markets; and (2) Executing your investment plan with discipline and staying diversified are important regardless of what the headlines are saying. Despite three of the largest U.S. bank failures in history in the 1st quarter and amid forecasts of recession in the offing, balanced portfolios generally experienced full-year returns in just the first six months of 2023.

This is not a time for us to relax, however, and assume all is well. There is a tug-of-war playing out between fiscal stimulus (massive multi-year government spending via a variety of programs) and monetary contraction (the Fed having raised interest rates 11 times since last March with more increases possible). This tug-of-war, the resulting volatility, and what looks like a market regime change will continue to unfold, favoring patient and skilled investors.

In our Q3 2023 Economic Commentary, we describe the forces – both positive and negative – pushing and pulling on the global economy and the markets and discuss where opportunities and risks may manifest as this and many other battles play out across the macroeconomic landscape.

While the latest economic data or the Fed’s recent move compel us to contextualize the here and now, our focus remains on the long term: the impact of secular developments on risks, opportunities and how portfolios should be positioned relative to client goals.

For example, since yields on high-quality fixed income have risen to levels that may support long-term goal achievement, some clients may be able to reevaluate their target exposures to risk assets relative to fixed income. Others may be able to increase exposure to private equity and/or diversifiers, which attempt to take advantage of opportunities that arise from tighter credit conditions, overall market volatility and dislocation. With that said, the adjustments we make to individual portfolio(s) at all times reflect each client’s specific goals, as well as their ability, desire and/or need to take various types of portfolio risk. Ours is a tailored process focused on client goal achievement.