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.

We wanted to provide an update with our latest thoughts given the continued volatility across capital markets and the escalating situation in Russia / Ukraine.

We feel fortunate to be a couple of weeks delayed in translating our thoughts in writing for the year ahead since the investment landscape has changed considerably since the beginning of this year.

We suspect that a common conversation topic over the final weeks of the year will be how glad people are to turn the page on 2020 and begin a new year.

Each year investors like to reflect upon their investment portfolios, and we find this to be especially true at the end of a decade. As always, the last decade was full of countless surprises from an investment perspective.

Early this year former Federal Reserve Chairman Ben Bernanke and past Chairwoman Janet Yellen spoke to a group of economists in Atlanta. At one point the following exchange occurred between them: Dr. Yellen said, “I don’t think expansions just die of old age,” to which Dr. Bernanke replied, “I like to say they get murdered.”