Quarterly Update: Strategy, Patience, Adaptability

As the third quarter drew to a close and we approach the final innings of 2023, we mark a parallel between the world of investing and America's favorite pastime—baseball. They both involve patience, strategy, and the importance of adapting to new circumstances. Let's dive into market observations with this analogy in mind. 

During this latest quarter, the U.S. stock market was -3.3%, international stock market was -3.8% and the bond market return was -3.2%. The broad commodity index, led by energy, was one main asset class that produced a positive return during the quarter. Stepping back and looking at the year through the first three quarters, U.S. stocks were up +13.07%, international +5.34%, and bonds were down -1.21%.  

Just as a baseball manager wouldn't build a team of only pitchers or catchers, diversifying investments across asset types and time periods is essential. Importantly, the benefits of diversification are realized over the long term, not during every quarter, or inning.  

As is always the case with a portfolio, we seek to fortify our "lineup" with a mix of assets, aiming to strike a balance between stability needed for the short term and growth for the longer term. We believe this balance helps protect investors from the impacts of inflation and grow wealth over time.  

Financial markets are constantly adapting to new information and future expectations. Over the past several quarters stock and bond markets have adjusted to an environment of higher interest rates, and changes to inflation. These curveballs have both caused and led to new field conditions. For example, bond yields are higher and arguably more attractive than we have seen in 15+ years. High quality bonds appear to be back to providing their traditional benefits: income and diversification.  

Inflation continues to be on the rise (3.7% year over year as of August 2023); however, increasing at a slower rate than the much higher pace one year ago (9% year over year as of June 2022). For much of the past fifteen years inflation has been more of an afterthought for most investors. In today's environment, inflation is more impactful and requires increased consideration.  

In closing, while the world of investing and the game of baseball have their differences, the principles of strategy, patience, and adaptability are present in both.

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