April 2023 Market Commentary

April 29, 2023 is our Client Appreciation Day brunch at Lansdowne Country Club.  We have a sensational speaker this year… Shannon Miller.  Shannon is…

April 29, 2023 is our Client Appreciation Day brunch at Lansdowne Country Club. 

We have a sensational speaker this year… Shannon Miller.  Shannon is the most decorated U.S. female gymnast in Olympic history with a total of seven medals.  Please mark your calendar to attend and meet Shannon.  Her message will be both inspirational and uplifting, something you don’t want to miss. 

The US Federal Reserve continues their efforts to tame inflation which rocketed up to multi-decade highs in 2022.  Inflation peaked in June of 2022, on a year-over-year basis, and has been slowly drifting down from the highs since then.  The pace at which the Fed raised rates certainly has had its consequences, but we believe their swift efforts will shorten what could have been a much more painful and prolonged inflationary period.  

A recent consequence of rapidly raising rates reared its ugly head in March as the first bank failure in the US since 2008 occurred when Silicon Valley Bank failed to meet liquidity obligations. The government stepped in to take over and ‘backstop’ the bank.  Shortly thereafter Signature Bank also fell to the same fate.  The stress put on small regional banks became a concern with these two failures and the fear of a much more widespread contagion took over investors’ minds.  In reality, these banks operated in some niche marketplaces and had been taking on risks over the past several years that we believe is not reflective of the greater banking environment.   

Learning from the Financial Crisis of 2007-2009, the Fed, in conjunction with the US Treasury and FDIC, quickly stepped in to offer a solution which would have relieved SVB and Signature of their liquidity issues. This action probably saved some additional smaller banks from the same fate but didn’t impact the larger banking entities.   

Charles Schwab also made headlines in March as their stock price dropped significantly during this implied contagion period.  However, we believe this was misguided ‘sympathy’ selling along with many other financial company stocks. 

The point here is that a decade ago, these events would likely not have existed to the extent they do today.  Information is now moving at such an accelerated pace that it creates its own market impact and volatility.  The government’s response was swift and appropriate to mitigate investors’ concern and instill confidence in our institutional safeguard systems such as Federal Deposit Insurance Corporation (FDIC), Securities Investor Protection Corporation (SIPC), SEC’s Customer Protection Rule and many others. 

Good governance and confidence are essential elements to robust and healthy economic institutions and ours are the greatest in the world.  While the Fed still has more work to do to restrain inflation, their efforts will be successful in the final analysis.  Patient and disciplined investors will ultimately benefit by remaining focused on their long-term goals with sound investment strategies. 

Thomas A. Toth, Senior
Kenneth Bowen, II
President & CEO