A subdued September isn't a cue to divest entirely or act impulsively, but rather a reminder to calm the nerves. Drawing a parallel to Phil Connors' world - think of it more as "climate" rather than day-to-day "weather".

This newsletter will spotlight the positives and concerns we see in the markets, shaping the outlook for the second half of 2023.

While resolving the debt ceiling issue was positive, our concerns remain intact. Despite this year's rally, providing relief from last year's downturn, we remain cautious about upcoming challenges.

To avoid confusion, we wanted to clearly summarize our thoughts on the debt-ceiling debate. Like so many politically charged issues, the debt ceiling carries more emotion and uncertainty than usual.

A systemic crisis looks to have been avoided for now, but we are prepared for more volatility in 2023 as the economy and markets continue to adjust to a more fragile backdrop.

Ultimately, the full extent of the issues plaguing the banking system, including those faced by SVB and other similar institutions, is yet to be determined. Or, to put it another way, the ripples are still unsettled.

Ultimately, the environment of higher rates, and more attractive yields should be considered a positive. Yes, stock returns may come down, but investors should still expect a solid return in the long run.

In many ways, the 2023 outlook is as cloudy now as it was when the year started. Whether the US economy can evade a recession this year remains total guesswork. Please enjoy our latest review of markets.

Despite an abundance of recession headlines in 2022, the U.S. economy has managed to evade one thus far and is expected to have grown just under 2% in 2022. As we look to 2023, worry has shifted to recession.

Bear markets, as unpleasant as they are, exist for a reason – to transfer the leadership of one group of stocks to the next. The landscape is evolving, and once we are on the other side, leadership will certainly look different.

Markets are at a crossroads. After a couple of years of pandemic-induced stimulus, leading to overinflated markets at the end of ‘21, equity markets have gone from overvalued to undervalued and today sit near historical norms. Many questions linger as we approach 2023.

Therein lies today’s debate – is October’s rally a simple bear market trap, or is it the start of something more? As usual, there are conflicting storylines. We also take a look at upcoming midterms and what that means for your portfolio.

I would like you all to meet a famous character named Mr. Market – your mercurial manic-depressive friend. The allegorical Mr. Market was first introduced to the world in Graham’s 1949 book The Intelligent Investor to explain stock market fluctuations.

As we explore and evaluate markets and opportunities right now, I find myself using the lens of perspective as a helpful mechanism for clarifying what we are going through, and what we, as investors, should be considering as we look forward.

For investors, 2022 has felt like a battle against King Arthur. Add it all up, and investors have been battered and bruised through the first half of ’22. Investors have had few places to hide with stocks and bonds declining together. Where do markets go from here?

As we’ve discussed in previous updates, we never felt inflation was transitory because money supply was increasing too quickly for inflation to be transitory. As the cobra story illustrates, it has always been about incentives. Let me try and explain.

Surging interest rates and persistent inflation put sharp downward pressure on bond markets, which are on track for one of their worst years ever, and on U.S. equity markets, which had their worst first half of a year since 1970.

May returns belie an otherwise volatile month that saw stocks fall into bear market territory (down 20%) before a sharp rally to close the month. We remain defensive as we enter the “mid term” summer months.

There are several counterintuitive and contrasting data points happening simultaneously – today’s strong job number is another strong data point in a weak environment. We will be paying close attention to upcoming economic data.

We do not believe that a recession is imminent. However, looking out over the next several months, we do see risks skewed to the downside, as the Fed continues to tighten and inflation weighs on consumer spending.