Get Live Oak Private Wealth’s perspective on the shifting investment patterns and the impact on clients by downloading our 2023 Year-End Letter.
“Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day” – Charles T. Munger (1924-2023) Vice Chairman | Berkshire Hathaway
Get Live Oak Private Wealth’s perspective on the shifting investment patterns and the impact on clients by downloading our 2023 Year-End Letter.
Read our full investment commentary and letter to clients by downloading the Q3 2023 quarterly letter.
“Patience and discipline can make you look foolishly out of touch until they make you look prudent and even prescient.” -Seth Klarman, The Baupost Group
“Nothing like price to change sentiment.” -Helene Meisler
As we write this 3rd quarter letter, we are and have been experiencing several major headwinds for the US economy and the US equity and bond markets. While this is nothing unique to investors and markets, it seems as if an abnormal number of issues are at the forefront of markets.
Read our full investment commentary and letter to clients by downloading the third quarter 2023 letter.
Read our full investment commentary and letter to clients by downloading the Mid-Year letter.
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”
-Benjamin Graham
Any number of things could have derailed the equity markets in the first six months of 2023. Despite a banking crisis, the threat of a U. S. debt default, and more rate increases from the Federal Reserve, the markets climbed a “wall of worry” with the S&P rising by 16.9%. Investors have been encouraged by the fact that the Fed’s rate increases haven’t ended the economic expansion. First quarter GDP increased at a rate of approximately 2% annualized, above the consensus estimate of 1.3%. About the time of the Silicon Valley bank collapse, investors’ attention shifted back to the old leaders, mega-cap technology. Mega-cap tech companies have fortress balance sheets and would likely be less impacted by tightening credit than other areas of the market. More importantly, mega-cap tech companies are expected to benefit from artificial intelligence (AI), which overnight, became all the rage and focus of the markets.
Read our full investment commentary and letter to clients by downloading the Mid Year letter.
Read our full investment commentary and letter to clients by downloading the Q1 2023 quarterly letter.
“Risk is not inherent in an investment; it is always relative to the price paid. Uncertainty is not the same as risk. Indeed, when great uncertainty-such as in the fall of 2008-drives securities to especially low levels, they often become less risky investments.” – Seth Klarman, The Baupost Group “The Forgotten Lessons of 2008”
“This current banking crisis involves far fewer financial players and fewer issues that need to be resolved.” – Jamie Dimon, JP Morgan Chase & Co. Annual Letter to Shareholders – March 2023
We feel one of our most important responsibilities is to communicate with you frequently about the markets, what we are paying attention to, as well as to provide planning insights to enhance your overall financial well-being. In the past, we have provided you with a deep dive into our portfolios alongside market data on a quarterly basis. As we mentioned in our 2022 Year End Letter, we will be adjusting the content of our quarterly letters to ensure that we are touching upon other important aspects of your financial life, while continuing to provide in depth commentary on our portfolio holdings in our Mid and Year-End Letters. The Q1 2023 letter will be the first one of these. In this letter you will find first quarter market data, a brief commentary on the disruption in the banking sector, as well as a piece from our Financial Planning team on digital assets and estate planning. So, while we may be changing the format of our quarterly letters, we remain dedicated to our philosophy about investing, our focus on financial planning, and our commitment to our clients.
Read our full investment commentary and letter to clients by downloading the first quarter 2023 letter.
Get Live Oak Private Wealth’s perspective on the shifting investment patterns and the impact on clients by downloading our 2022 Year-End Letter.
“In my 53 years in the investment world, I’ve seen a number of economic cycles, pendulum swings, manias and panics, bubbles and crashes, but I remember only two real sea changes. I think we may be in the midst of a third one today.” – Howard Marks, Oaktree Capital, “Sea Change”; December 13, 2022
Get Live Oak Private Wealth’s perspective on the shifting investment patterns and the impact on clients by downloading our 2022 Year-End Letter.
We are incredibly proud of our Managing Director and Co-Chief Investment Officer, Frank Jolley, for being featured in the recent Business North Carolina Magazine article titled “Best N.C. Stock Picks for 2023.”
Read our full investment commentary and letter to clients by downloading the Q3 2022 quarterly letter.
“Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.” – Fed Chairman, Jerome Powell Jackson Hole Speech August 26, 2022
Boy, that pain escalated quickly. Markets, both equity and fixed income, finally took Chair Powell at his word as investment sentiment shifted dramatically this quarter. Prior to the Federal Reserve’s annual August retreat in Jackson Hole, the U.S. equity market had rallied 17% from the June lows thru mid-August. For some reason, the markets sensed, incorrectly, the Fed was going to moderate its interest rate increases. Fed officials, especially Chair Powell, thought market participants were too complacent, misreading their intentions to slow the economy to combat high inflation. This perceived “pivot” was making the Fed’s job harder. Powell decided to send the markets a message and tossed the punchbowl into one of the Teton’s beautiful mountain streams.
Then the markets woke up to the fact that Chair Powell was becoming Mr. Tough Guy, a la Paul Volker, and the machines kicked into gear, dumping stocks, bonds, and crypto, indiscriminately right up until the market close at 4:00 pm Friday, September 30. To make matters worse this quarter, central banks around the world also moved to combat the effects of rising inflation as banks from South Africa to Norway raised rates. When the Bank of England raised rates for the seventh time in a row, things started to break. The risks of a significant policy mistake leading to a global contagion started to heighten. Currencies started trading widely, and the British pound cratered to its lowest point in 37 years. Long-term U.K. Government bonds, or Gilts, flash crashed, losing a third of their value in four days going into the end of the quarter. While world markets were getting unstable, the U.S. dollar was soaring in contrast, along with U.S. Treasury yields, triggering the quantitative trading algorithms used by the massive macro commodity trading advisors (CTA’s) to drive ETF and index funds to dump stocks and bonds. The cherry on the top of the sundae of pain was a scary echo from 2008, another possible “Lehman moment” as fears surfaced that Credit Suisse, a globally systemically important bank was on the brink of collapse.
Read our full investment commentary and letter to clients by downloading the third quarter 2022 letter.
Read our full investment commentary and letter to clients by downloading the Q2 2022 quarterly letter.
“I think this is among, if not the most complex, dynamic environments I’ve ever seen in my career. We’ve obviously been through lots of cycles. But the confluence of the number of shocks to the system, to me, is unprecedented.” – John Waldron, Goldman Sachs
The S&P 500 just experienced its worst first half in over fifty years and its second-worst start to the year since 1935. Bonds, which typically perform well in times of market weakness, have become positively correlated with equities, leaving balanced investors with essentially nowhere to hide. Long-term treasury bonds lost 20.1 % in the first half, essentially matching the S&P 500 decline of 19.96%. Much of the decline can be attributed to inflation, which the Fed had assumed would be transitory, but has turned out to be more persistent than expected. This has forced central banks globally to pivot from holding rates near zero to a “hawkish” stance in an attempt to stem inflationary pressures. The S&P 500 has officially entered a new bear market (peak-to-trough decline of 20%), the 27th bear market since 1929. The worry is that central bank actions could push the global economy into recession. The chart from JP Morgan Asset Management below suggests that all of the market decline through the first half of the year can be attributed to price/earnings multiple compression. However, we are aware that with economic weakness, earnings will be under pressure to meet expectations over the next few quarters.
Read our full investment commentary and letter to clients by downloading the second quarter 2022 letter.