Second Quarter 2023 Review

The failures of Silicon Valley Bank and Signature Bank New York—as well as UBS’s takeover of Credit Suisse—dominated financial news headlines in the first quarter. Nevertheless, investors shifted capital into riskier segments of the market, like growth, technology, and cyclical stocks.

We believe this “risk on” rotation was a wager that bank stress could hinder economic growth later in the year, which considerably raises the odds of a Fed “pause” or even rate cuts later this year.

In this sense, bad news for the economy has been good news for the interest rate outlook, which we think is also good news for stocks.