The Federal Reserve is steadfast in bringing down inflation which also means bringing down growth. The inflation genie is still not back in the bottle, even though it is trending in the right direction. A recession is a consequence of slowing or negative growth. The inflation data will continue to drive the Federal Reserve going forward, along with future rate hikes.
As a reminder, the index returns above should only be used as a very broad point of reference.
Cash & Fixed Income: High-yield corporate bonds led for the quarter and all other time periods except the 1-year, where cash was king. However, cash was the worst-performing category for the quarter, 10, and 15 years. Aggregate bonds were the laggard for the past 1, 3, and 5 years.
Equities: Foreign equity led for the quarter and 1-year. Mid-cap stocks led the past 3 years, while large U.S. stocks led for all other time periods. Real estate was the worst performer for the quarter, 1 and 3 years, while foreign was the laggard during all other periods.
The markets have rallied significantly over the past six months since bottoming out in mid-October. It is important to remember that equity markets usually bottom well before a recession is over and many times even before we know that we are in one. Keep in mind that markets are forward-looking and are looking past the potential slowdown to the next recovery. In the meantime, we believe the markets will be rangebound until there is more clarity on the economic front. As a result, we remain cautious.