With the losses of Silicon Valley Bank and several other regional banks during this first quarter of 2023, the federal government moved quickly to reinforce public confidence, providing account holders with access to all of their money, even on accounts exceeding the Federal Deposit Insurance Corporation (FDIC) limit of $250,000. Despite the government’s quick action, questions around the U.S. banking system have caused anxiety across the county. While we understand the concern, our biggest problem relative to the banks is that they have been tightening their lending conditions, and we expect that to continue. This means less lending to businesses and ultimately will drag on economic growth.
In terms of portfolio performance, most of the asset classes were positive. Our top holdings this first quarter is in the developed international market space, which delivered 8.6% in just three months. This does not surprise us since we expect strong growth from this asset class. In one of our last videos, we discussed this asset class which makes up 30% of the world’s capitalization and is trading at a low price relative to its value. Many of our enhancer asset classes also delivered a strong performance, except commodities which were down 8%. Last year it was the top-performing asset class. However, with the cutbacks announced by Opec, China’s reopening, which should drive demand for raw materials, and the continued need for Agriculture, we have not given up on this asset class. It is also important to remember that regardless of month-to-month performance, its low correlation to US equity validates its role within our portfolios.
Whatever happens in the markets these upcoming months, we remain hyper-diversified and ready to manage volatility. We know this is our best chance for weathering any storm. If you have any thoughts or questions, please get in touch with us.