By Tim Holland, CFA Three months ago to the day, we published a note that took a look at the recent weakness in the US Dollar (What Ails The US Dollar – January 17, 2023). When we took pen to paper in January, the US Dollar had corrected about 10% from a late 2022 high that also marked a 20+ year high for the Greenback relative to a basket of other currencies. At the time, the weakness in the US Dollar seemed more of a curiosity than anything else and a development that we ascribed to several pretty straightforward and pretty benign economic developments, including the Federal Reserve being cl ..read more

Tim Holland, CFA, Chief Investment Officer of OCIO, asks and answers three top-of-mind questions as investors receive their quarterly statements and reflect on the past quarter: What went wrong at Silicon Valley Bank, and should we be concerned about a collapse of the financial system? With the labor market still so strong, is the risk of recession still on the table? Was the March interest rate hike the last of the current cycle? The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capita ..read more

Last week’s Weekly Wire turned to William Shakespeare – “A rose by any other name would smell as sweet” – to help make a point about tightening financial conditions. This week’s Weekly Wire turns to Winston Churchill – “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning” – to help make a point about the US labor market. Those famous lines were delivered by Prime Minister Churchill in late 1942 following British victories over Nazi Germany in North Africa, victories that followed years of setbacks and defeats for the British in World ..read more

Our apologies to The Bard for this week’s title, an admittedly awful take on one of the most famous bits of dialogue penned by the great William Shakespeare – “A rose by any other name would smell as sweet,” as said by Juliet to Romeo in the play Romeo & Juliet. While the quality of our prose might be underwhelming, the point about tightening financial conditions is worth making. As we know, the Federal Reserve has raised rates nine times over the past year in hopes of bringing down historically high inflation. And as we also know, the way high interest rates solve for high inflation is t ..read more

Last week the Federal Reserve raised the Fed Funds Rate by 25 bps, to a range of 4.75% on the lower end and 5.0% on the upper end (see chart), the ninth interest rate increase of the current rate hiking cycle, and an increase that took the Fed Fund’s Rate to its highest level since 2007. Despite the market volatility of late, there wasn’t that much doubt going into the March meeting as to where the Fed Fund’s Rate would land coming out of the March meeting. The same really can’t be said about the path forward for monetary policy, at least as of today; based on the latest Summary of Economic P ..read more

Following on an exceptionally rough and rare return set for stocks and bonds in 2022 – the S&P 500 was off 18% and the Bloomberg US Aggregate was off 13% last year – our first Weekly Wire of the year pondered the likelihood of a repeat performance for the major asset classes in 2023 (the title of that first Weekly Wire was simply What Are The Odds?). To put a finer point on how rough and rare 2022 was from a return set perspective, consider it was just the fifth year in 93 where stocks and bonds both declined for the full year (see chart – the circles mark those years). And when one consi ..read more

We believe monetary policy acts with a lag, that it takes months, if not years, for changes in the Fed Funds Rate to impact the economy. That dynamic is one reason why the Fed often goes too far one way or the other, leaving rates too low for too long which leads to more inflation than the bank desires, or raising rates too fast and too far which leads to the recessions the bank seeks to avoid. We think this is a point worth making now for two reasons: we are about to mark the anniversary of the first Fed Funds Rate hike of this cycle and Fed policy decisions of the past three years had a mea ..read more

An anniversary is an easy reason to look back on an event, a point in time – good or bad, happy or sad – that has given our life meaning. The event can be personal (a wedding) or professional (the first day at a new job). For the purposes of this week’s Weekly Wire, for me, I guess it is a bit of both. I was working as an equity portfolio manager when the S&P 500 bottomed out during the Great Recession, so how the stock market was performing at the time had a meaningful impact on me professionally, and, as you might imagine, it had been a very stressful 18 months as the index moved from i ..read more

The title of this week’s Weekly Wire might seem a bit off considering that the US economy added 517,000 jobs in January, the US unemployment rate sits at 3.4%, retail sales were up 3% in January and last week’s Weekly Wire made the case that one BIG reason not to bank on a recession was the resiliency of the US consumer, noting that with consumer spending accounting for about 70% of US GDP, if the consumer was okay, the economy should be okay. So, have we had a change of heart about the outlook for the US consumer and in turn the US economy, at least in the near term? The answer is no, the US ..read more

Over the past several weeks we have pointed to signs that we think point to coming weakness, if not outright recession, for the US economy. Those signs have included The Conference Board’s Leading Economic Index, or LEI, dropping 3.8% over the six months through December, a trajectory that signals a recession is likely within the next 12 months; the contraction in the US money supply, as measured by M2, in 2022, the first time that has happened on an annual basis and a dynamic that speaks to liquidity being drained out of the economy; and maybe most importantly the inversion of the US 3 Month ..read more