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Quarterly Client Update Q1 2023

Each quarter as we write these updates, we are amazed at how many market-impacting stories happened over 90 days. Since the beginning of the year, we’ve had tanks being sent to Ukraine, spy balloons shot down, and a bank closed by regulators*—not to mention the “normal” headlines of interest rates rising, persistent inflation, and predictions of recessions.

Markets are continually evaluating this information, and this is evident in the daily market volatility we all experience. The primary question for many investors is if and when a recession is coming. While we wish the answer to this question was clear, it is not, and while it might be tempting to use short-term strategies to avoid market turmoil without missing out on long-term gains, researchers have repeatedly proven this is not effective.

Our 3rd quarter 2022 letter asked similar questions as US stocks were down 24.62%1 during the first 9 months of 2022 and things appeared to be getting worse. Since then, US stocks were up 7.18% in each of the past two quarters.2 One of the biggest concerns 6 months ago was international stocks, which have gone up 28.20% since that time.3

During 2022, the top performing S&P 500 sector was Energy with a gain of over 50%. Technology, Communications, and Consumer Discretionary were all down over 28%. So far in 2023, those three sectors are up more than 15% while Energy is down over 5%.4

This unpredictability is one of the reasons we do not recommend trying to predict short-term market movements. We are not sure if a recession is coming, nor how disruptive it will be if it does come. Anyone who tells you they know is not being honest. We do believe holding a diversified portfolio that is rebalanced as needed and combined with a frequently updated financial plan is an approach that works regardless of the current headlines.  

Please don’t hesitate to reach out if you would like to review things or just check in. We will also be reaching out if we think your situation would benefit from a conversation.

*Silicon Valley Bank (SIVB), and other regional banks by extension, garnered much of the financial headlines yet SIVB represented just 0.04% of the Russell 3000 and regional banks represented approximately 1.70% of the Russell 3000.5


1Source: LPL Financial Daily Performance Report as of 9/30/2022, Russell 3000

2Source: Quarterly Market Review, Dimensional Fund Advisors, Q4 2022 and Q1 2023

3Source: iShares MSCI EAFE ETF (EFA) Total Return Price % Change, YCharts

4Source: Bespoke/MFS

5Source: Regional banks weight reflects the weight of the “Regional Banks” GICS Sub-Industry. GICS was developed by and is the exclusive property of MSCI and S&P Dow Jones Indices LLC, a division of S&P Global.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. 

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.