2023 Q2 Market Review

The financial markets continued to gain in Q2. Four of the five asset classes* we follow were higher in Q2; only commodities were down.  In Q2 the US markets were the better performers mainly due to a handful of larger tech stocks. A well-diversified portfolio is an effective all-weather strategy for investors.

In Q2 the financial press was mainly occupied with the chances of a “soft landing” v/s a “hard landing” and what the Fed will do to interest rates at the next meeting.  These are useful issues for the short-term oriented investor.  For us, however, the perennial pre-occupation is “what is a winning investment strategy for our clients over the next 10 or more years?”

The evidence-based answer remains: invest in asset classes that have well established long-term results (like Equities).  Of course, we regularly monitor our investments to make sure that they are delivering on their investment philosophies.  We also cross-reference competing investments to ratify that our choices are compelling. (In Q2 we reviewed our specific investments as well as our asset allocation models and are gratified by them). We also keep abreast of investment strategies that may be good options for portfolios. There are never guarantees to life, especially investment life, but we do believe our investment approach is a very defensible one for long horizon clients. Certainly, we are comfortable investing our money in this manner.

We respect investment risk by being vigilant as investors – vigilant about monitoring fundamentals and vigilant about monitoring risks but NOT reacting to each bit of new (especially sensationalist) news. And, we don’t chase fads and tend to make portfolio changes deliberately.

So ..  soft landing or hard landing and how to invest for it. We believe that leaning on time-tested principles is more important than trying to forecast the future, a futile endeavor in our opinion. To us it reinforces investment principles that have been profitable for us:  One, be evidence based investors i.e. dig deep into data to understand the sub-currents. Two, diversification is important for preserving portfolios.  Three, Volatility is not Risk so make friends with it.

In 2023, we plan to keep clients diversified across the 5 main asset classes, be prudent with any risks we take, and to remain cost-conscious. We think this remains a sound investment approach.

* Our Asset classes are: Cash, Fixed income, Equities, Real Estate and Commodities and we think these pretty much cover the investable investment universe.

19 Jul 2023