Liberation Day turned into Obliteration Day(s) as the S&P 500 just logged its fifth worst two-day stretch since 1950. Only October 1987, November 2008, and March 2020 had two-day stretches worse than the last two days (Source: Bespoke Invest). For all intents and purposes… 

Capital markets seem to have become increasingly dynamic as the pace of innovation has compounded around the world, which in turn has given investors an endless list of variables to consider when constructing portfolios. 

The first half of 2024 was strong for global risk assets as many investors believed in the “goldilocks” narrative for the markets. US economic growth was strong, inflation continued to make progress lower, and there was an unquenchable thirst for “AI” related stocks, which seemed to go up every single day, regardless of the macro or micro news flow. 

In theory, the turn in a calendar year should have no impact on market trends or leadership, yet it always amazes us how each year develops its own unique characteristics and storylines. Since COVID, the investment landscape has been unique. Various aspects of the economy seem as desynchronized as they have been at any point in modern times.

Consistently, we think about the idea that “markets often do what causes the most amount of pain for the most amount of people”, at least over shorter time frames. The first half of 2023 has been another sterling example of this notion, as many investors remain as underweight equities as at any point since 2009, according to the June Bank of America Global Fund Manager Survey. 

Since the last time we formally wrote in mid-December, there have been some significant changes to the investment landscape. Most notably of course is that we recently experienced the largest bank failures since the Great Financial Crisis.

Good afternoon, the failure of Silicon Valley Bank shook markets last week as investors try to comprehend the uncertainty of this situation for the entire banking industry. It’s a tragic situation for those involved. We have listed several thoughts below.

Every December Wall Street strategists partake in their annual ritual of forecasting where the S&P 500 will be a year from now. To be fair, this is somewhat of a thankless exercise as capital markets simply do not allow investors to be this precise.

There is no shortage of ways one could describe the current investment environment, but we will allow the great Stanley Druckenmiller to opine on it for us:

Good afternoon, we wanted to share some current thoughts on the markets and
portfolio construction given this challenging investment environment.