Every quarter, Canterbury's Outsourced CIO committee shares their observations of the market that impact the management of our discretionary portfolios in the Canterbury Outsourced CIO Commentary.
Amidst concerns over inflation, the economy, the dollar, the potential banking crisis, and the Federal Reserve, the first quarter of 2023 was marked with higher volatility in both equity and fixed-income markets.
The repercussions of the Federal Reserve's resolute stance to fight inflation through higher rates became apparent during the quarter, particularly with entities whose liabilities adjust with short-term rates. The crisis with Silicon Valley Bank demonstrated the risks of an asset-liability mismatch, particularly when short-term rates rise quickly to levels higher than long-term rates. Fears of a widespread bank run dissipated with the rapid response by Central banks to step in and insure all deposits, which sent a clear message that even one small financial institution is too big to fail if there is a risk of contagion.