Bond markets dragged lower during the month amid debt ceiling concerns and rising rates in the U.S. U.S. large cap equities were a bright spot, advancing on strong growth sector earnings and positive sentiment around artificial intelligence related constituents, and REITs traded sharply lower with office space occupancy remaining low and the residential real estate market beginning to cool.

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Bond markets saw modest gains in the month. Rates were rangebound within the U.S. in April, and the 10-year Treasury ended the month essentially where it began. U.S. Large Cap and International Developed equities outperformed on muted volatility and strong value sector performance and REITs posted positive performance on resiliency from the residential sector.

For many, 2022 was a year of resetting expectations. Public markets – both equity and debt – were faced with pressure as a result of persistent inflation and corresponding interest rate hikes. Investors were left with few places to hide as the market adjusted to the ramifications of a new era.

Fixed income markets were broadly positive as rates moved lower in the month. Despite the Fed raising interest rates, longer dated yields fell as uncertainty about the direction of the economy remains. Despite elevated volatility, most equity markets saw positive returns in March. U.S. large cap equity led the way, as mega-cap growth related stocks surged. REITs took a step back in March and jittery banking sector negatively impacted the space as many regional banks have large exposures to real estate.

Our Quarterly Considerations report includes data on First Quarter 2023 Market Themes, Economic Review, Asset Class Performance, Fixed Income Market, Equity Market, Real Asset Market, Diversification and Financial Markets Performance.

The recent events surrounding the failure of Silicon Valley Bank and Signature Bank, combined with the volatility in stock prices of other financial institutions, serve as stark reminders that the U.S. and global financial system is complex and ever-changing. These periods can be unnerving for investor psychology and can leave some wondering, “Are my investments and cash safe?”

While markets retreat, the shift in rate expectations show signs the end of rate hikes is near.

Interest rates rose as market expectations “caught up” with Federal Reserve projections. A strong jobs report and a January inflation reading that was higher than expected influenced the reset. Elevated inflation and a strong labor market were drivers of lower equity returns, as investors digested the data and expectations of further Fed actions grew and REITs took a step back alongside the broader equity market, weakness in office and lodging were large detractors.

Broad asset classes rose higher off 2022 lows on cooling pricing pressures and the possibility of a Fed pause. Equities abroad outperformed amid a declining U.S. dollar and higher than expected growth, and the U.S. debt ceiling has sparked conversation, however the need for a resolution will likely abate an insolvency crisis.

Fixed income investors benefited from declining intermediate and long-dated yields as inflation continued to ease off recent highs and market expectations grew for a Fed rate pause later in the year. Equity markets posted favorable returns in the month. A resilient labor market has helped support a “soft-landing” scenario but lagged effects of monetary policy remain to be seen and REITs had a strong month on the back of falling interest rates and general equity strength.

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Our Quarterly Considerations report includes data on Fourth Quarter 2022 Market Themes, Economic Review, Asset Class Performance, Fixed Income Market, Equity Market, Real Asset Market, Diversification and Financial Markets Performance.

An upward move in bond yields, as continued tightness in the labor market stoked fears of further hikes, weighed on fixed income returns. U.S. equities were lower as broad layoffs and fears of a recession in 2023 induced negative sentiment, and energy prices led commodity markets lower in December amid weak European demand, while real assets drew down in tandem with equities due to weak sentiment.

Goodbye TINA (There is No Alternative)

Despite another 75 basis points hike by the Fed, lower-than-forecast inflation numbers gave investors hope of a slowdown in future hikes, pushing rates lower and supporting fixed income returns. Promising economic data, such as lower inflation and strong retail sales, aided equity returns across geographies, with domestic markets trailing foreign developed and emerging market equities, and REITs were higher for the month on softening inflation data and positive interest rate-related sentiment.

Equity markets broadly enjoyed a reprieve from September lows, but fixed income and China continue to struggle in the face of a hawkish Fed and investor concerns as President Xi consolidates power.

October brought more pain for investors, interest rates moved higher and the yield curve remained inverted. Domestic and developed markets equities delivered strong returns in October as data revealing a slowdown gave investors hope for a Fed pause and positive equity momentum helped REITs as well, which saw a broad-based rally.

Our Quarterly Considerations report includes data on Third Quarter 2022 Market Themes, Economic Review, Asset Class Performance, Fixed Income Market, Equity Market, Real Asset Market, Marketable Alternatives, Private Equity Market, Diversification and Financial Markets Performance.

While longer term performance remained strong, one-year return calculations have moderated across all private equity strategies. The fundraising environment was competitive and both middle market and emerging managers faced headwinds as allocators prioritized long-standing relationships with larger, more established firms.