Category: CIO Commentary

In financial markets, the impact of bad news can vary. Often, it’s straightforwardly negative, and other times, paradoxically, it becomes good news. Currently, the markets are eagerly awaiting an economic slowdown that could reduce job and wage growth. This hope is driven by the belief that the Federal Reserve will then be able to initiate an easing cycle, rewarding investors for looking beyond a potential recession towards brighter economic prospects. This is the market’s version of anticipating future opportunities, much like “skating to where the puck will be. “Historically, during economic downturns, this anticipatory behavior pushes earnings multiples higher as current earnings hit their lowest point. This contrasts with robust economic conditions where earnings are at their peak and earnings multiples are closer to their lows. If markets accurately predict shifts in interest rates and earnings, this pattern makes sense. However, as we’ve witnessed this year, markets can sometimes prematurely discount changing earnings or future interest rate levels, necessitating corrections back to previous levels when conditions revert, as occurred this fall.

This is an excerpt from a longer commentary. Please Download the PDF to read the entire 4th Quarter 2023 CIO Commentary.

We saw a glimpse of what equity markets could do this summer when, for a couple of months, investors started to believe in a soft landing and the markets began to price in this economic optimism. Year over year, CPI inflation dropped to 3.0% – from 9.1% a year earlier. The Fed has begun to believe that a recession can be avoided, and stocks rallied 9.4% in June and July. In the end, a weaker August and September interval pushed markets a touch lower for the quarter, though our managers generally outperformed.

This is an excerpt from a longer commentary. Please Download the PDF to read the entire 3rd Quarter 2023 CIO Commentary.

Back in March of 2022, we at TIFF looked at the challenges that lay ahead and thought discretion was the better part of valor. We trimmed our equity exposure to target weights as equity valuations dropped from stratospheric levels. We also kept our bond exposure short and tried not to take on any extra risk; interest rates rose the most in decades. This strategy worked in relative terms, but we still saw large portfolio drawdowns in 2022.

This is an excerpt from a longer commentary. Please Download the PDF to read the entire 2nd Quarter 2023 CIO Commentary.

March Madness

Recent market action calls to mind a quote attributed to Vladimir Lenin: “There are decades when nothing happens; and there are weeks where decades happen.” The past year and the past several weeks feel more significant than normal. We thought a brief recap of what got us here, where we are, and what the future might hold could be helpful. With events today moving fast, this letter will probably have a shorter shelf life than some of our other commentaries, except that you will forever be able to tease us for making projections of any sort in such a turbulent time.

This is an excerpt from a longer commentary. Please Download the PDF to read the entire 1st Quarter 2023 CIO Commentary.

So Many Moving Parts

2022 is a year most investors will be glad to put in the rearview mirror. Capital markets were unkind, almost all of them. Rather than try and dig into all the reasons why, we’ll summarize by saying that anything that could create inflation did – money printing, war, supply chain bottlenecks, slow response from the Fed, etc. – and the subsequent rise in rates derailed stocks, bonds, and just about everything else. If one could have known in advance just how high rates might go, then 2022 might not have been such a surprise, and maybe it could have been navigated better. With correlations high, it still would not have been easy, but maybe a bit easier.

This is an excerpt from a longer commentary. Please Download the PDF to read the entire 4th Quarter 2022 CIO Commentary.