2023 Q1 In Review - Integrity Wealth Advisors, Ventura & Ojai, California

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TOTAL RETURN 2023 Q1 + NEWSWORTHY EVENTS 10% January 8 – China reopens borders in final farewell to zero- COVID policy January 12 – Consumer Price Index comes in as expected at 6.50% S&P 500 TOTAL RETURN January 26 – US GDP rises at a higher-than-expected 2.9% annual rate in the fourth quarter of 2022 February 3 – The US announces it is tracking alleged Chinese Spy Balloons over the Americas February 6 – A 7.8 earthquake strikes in southeastern Turkey resulting in at least 50,000 deaths MSCI ACWI EX USA TOTAL RETURN February 15 – The CBO issues a warning that the US could face a debt ceiling crisis this summer if the debt limit is not raised or suspended March 1 – The 10-year treasury yield reaches 4% March 10 – Stock markets fell as Silicon Valley Bank is forced to sell securities at a loss due to a bank run; subsequently the FDIC put SVB into receivership BARCLAYS US AGGREGATE TOTAL RETURN March 14 – Inflation increases 0.4% in February as expected, and is up 5% from a year ago March 19 – UBS buying rival Credit Suisse in $3.2 billion rescue deal 9% 8% 7% 6% 7.49% 7.00% 5% 4% 3% 2.96% 2% 1% 0% -1% January February March As of close 3/31/2023 12% S&P 500 TOTAL RETURN MSCI ACWI EX USA TOTAL RETURN BARCLAYS US AGGREGATE TOTAL RETURN Source: https://en.wikipedia.org/wiki/2023 11% 10.42%
A WILD RIDE TO START THE NEW YEAR 2023 Q1 IN REVIEW History tells us that when the Federal Reserve starts raising interest, things are going to get interesting. So far in this tightening cycle, the damage has been significant but largely contained to financial markets. Special purpose acquisition companies (SPACs), meme stocks, “growth at any price” stocks and cryptocurrency have all posted spectacular losses, but the real economy has continued to expand, albeit at a much slower pace. However, the recent crisis in the U.S. regional bank sector threatens to upend that narrative. At the time of writing, two large institutions have failed at remarkable speed, and the impact on the whole regional banking sector will clearly be negative. We expect lower profit margins, more capital raising and more regulation as a direct consequence of these events. Regional banks are, of course, an important component of the financial system, and tightened lending standards could hurt a wide range of businesses. Commercial real estate (heavily financed by regional banks) and the private equity and debt complexes look to be likely candidates for a struggle under the weight of higher interest rates. Be that as it may, not all is doom and gloom. As China’s economy recovers from the effects of the country’s recently abandoned, highly restrictive pandemic policies, it will continue to boost that market’s corporate earnings. A softer official tone toward technology businesses that have been under intense scrutiny could also improve sentiment toward Chinese equities. After a year of weakness in global equity markets, valuations in most regions do not look very demanding. We know that while these metrics tell us little about returns over the next year, they are important for longerterm investors. The multiples we observe in Europe, Asia and, indeed, many sectors of the U.S. market suggest reasonable returns ahead for patient investors. We also see a very good chance that diversification beyond the dominant U.S. equity market will help overall equity returns. That has been true of late but was certainly not the case for most of the past 15 years. Overall, we have a slightly cautious view on the outlook for equity returns. We always prefer quality investments; this is not the time to compromise, and many surprises are likely to be unpleasant. Strong, predictable and profitable business models, experienced management teams, and well-funded, conservative balance sheets – these are all attributes that define an investment as “quality,” and attributes we find particularly appealing at this stage of the business and market cycles. ECONOMIC CHARTS & NOTES CONSUMER SENTIMENT Consumer sentiment slipped from a 12-month high in March but remained up versus last year as Americans increasingly braced for a possible recession. Retail sales went up from 2022 levels led by rebounding restaurants and bars. EMPLOYMENT The domestic unemployment rate is at 3.6%, slightly below where it was a year ago. Better than expected February jobs growth was driven by gains in the leisure, hospitality, retail, and government sectors. US Retail Sales Consumer Sentiment Unemployment Rate NonFarm Payroll 34% 100 16% 2200 US Retail Sales % Chg 28% 22% 16% 10% 4% -2% -8% 90 80 70 60 Consumer Sentiment Unemployment Rate % 14% 12% 10% 8% 6% 4% -825 -3850 -6875 -9900 -12925 -15950 -18975 NonFarm Payroll -14% Jan '19 Jul '19 Jan '20 Jul '20 Jan '21 Jul '21 Jan '22 Jul '22 50 Jan '23 2% Jan ' 19 Jul '19 Jan '20 Jul '20 Jan '21 Jul '21 Jan '22 Jul '22 -22000 Jan '23 Source: University of Michigan Consumer Sentiment. Retail Sales - U.S. Census Bureau. Source: U.S. Bureau of Labor Statistics
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Page 5 and 6: STOCK AND BOND CORRELATION 2023 Q1
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Page 9 and 10: SINCE MARCH 2020, WE HAVE SEEN: 202
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2023 Q1 In Review - Integrity Wealth Advisors, Ventura & Ojai, California

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