We are pleased to enclose our Autumn Update covering the period from January to March 2023.

With Covid-19 increasingly becoming something we think of as happening in the past, a much greater focus internationally is on the post-Covid recovery. The major aspects of this are centred on the global fight against inflation and general economic resilience.

A reader asks:

I manage my investment portfolio, largely with a very boring mix of three funds: U.S. index fund, international index fund and a total bond fund. Looking at the yield on my bond index fund, it looks like I may be able to get I better yield in a money market fund. Is there any reason to keep my bond allocation where it is rather than moving it into a money market fund?

I love the 3 fund index portfolio. Simple, diversified, low-cost. I’m a fan.

Many apps today claim to instantly calculate your net worth by adding up your banking and investment accounts and then deducting what you owe on your credit cards and mortgage. But in my mind, that number reflects wealth. Worth is more complex. Because I believe that if you make life better for someone else, then you’re worth something. That’s true in business, and it’s true in life. My parents never made a lot of money, but they were worth a lot.

Before you stop reading, I promise this is not another explainer about the SVB collapse. While (too) much ink has been spilled detailing the failure of SVB; it is often useful to take a step back from tumultuous market events and consider our own behaviour. What happens to us during such stressful periods and what does it tell us about how we deal with investment risk?

There are many different ways to succeed as an investor.

If there were only one approach that worked, everyone would do that.

I know plenty of investors with completely different styles that have found success in the markets over the years.

John Marsden grew up in a wealthy family.

He was a brilliant student who went to Harvard, graduated from law school and eventually fulfilled his dream of becoming a successful lawyer.

John got married in his 30s and had children.

Leo DeMarco also went to Harvard where he dreamed of becoming a famous writer. But after college he became a high school teacher and loved working with his students so much that his dream never came true.

“Don’t focus on predicting what will happen, plan for what can happen,” Co-CEO and CIO Gerard O’Reilly said in a recent webcast. Rather than trying to predict what markets will do, investors should plan for a range of potential outcomes.

Those following the news will have noticed that recently in the US two banks have gone into a government controlled wind down, Silicon Valley Bank and a rival, Signature Bank. In particular, Silicon Valley Bank was one of the top 20 largest US banks.

The Silicon Valley Bank was affected in part by holding bonds that had lost value as the US Federal Reserve increased interest rates. When interest rates go up unexpectedly, the value of bonds fall. The longer the term of the bond, the larger the fall in price. Silicon Valley Bank held very long-term bonds at low interest rates. On Wednesday 8 March, the bank sold their bonds at a significant loss and announced a plan to raise additional capital. However, deposit holders, which included many venture capital firms, became alarmed and sought to simultaneously withdraw their funds which led to the bank collapsing.

About a year ago, Russia invaded Ukraine, an appalling act rightly condemned by the world. In the immediate aftermath, experts weighed the economic impacts, with many projecting sharply higher commodity prices. The prediction made sense: A Russian oil embargo would crimp supply, sending prices higher, or so the thinking held.

I did an interview with Janet Alvarez for The Business Briefing on SiriusXM last week and she asked me for something I’m thinking about that not a lot of investors are talking about at the moment.

It’s kind of hard to find something no one is talking about because so many people are talking all the time now what with 24-hour financial news channels, a plethora of financial media companies, blogs, Substacks, newsletters, social media and so forth.

Investment opportunities exist all around the globe, but the randomness of global stock returns makes it exceedingly difficult to figure out which markets are likely to be outperformers. How should investors deal with this kind of uncertainty?

Recent value returns paint a very different picture from returns just a few years ago. In a webcast, Co-CEO and CIO Gerard O'Reilly puts value's recent performance in context and underscores the importance of investor discipline.

The investor narrative has changed over the last couple of weeks. It went from everyone thinking a recession was a fait accompli to maaaaybe we can actually escape its grip.

Inflation is coming down. Wage growth is decelerating. Activity is returning to the housing market. And the labor market is still incredibly strong. Put all these together and it sounds like the odds of a soft landing are increasing. Both James Bullard and Larry Summers came out this week saying as much.

Each year Aswath Damodaran at NYU kindly updates the annual returns for stocks (S&P 500), bonds (10 year Treasuries) and cash (3-month T-bills) going back to 1928.

I love this data because stocks, bonds and cash are the building blocks of asset allocation.

We hope you had an enjoyable time over the Christmas and New Year period.

It is our pleasure to enclose our Summer Update covering the reporting period from October to December 2022.

A reader asks:

People are saying that the bond market is screaming recession. Has the bond market ever been wrong? Any notable examples and why was it wrong?

The bond market is known for being much smarter than the stock market but we don’t have to go back very far to find a time when it was wrong.

Two years since the pandemic shock helped drive global share markets down 30-40% in the space of weeks, volatility is back. This time, however, it’s war, inflation, and recession fears that are dominating headlines, and not even bonds are immune. It’s a worrying time for investors, to be sure. But just as in every crisis, discipline is the key.

What are people paying for when they seek out a financial planner? Where are the value-adding benefits in this relationship? And what are the key roles of a financial planner? The real answers to those questions may surprise you.

Typically, financial planners highlight among their services advice on asset allocation, retirement planning, cash flow analysis, insurance, wealth protection, estate planning and so on.

Dimensional is excited to congratulate Douglas W. Diamond on being awarded the 2022 Nobel Prize in Economic Sciences. Professor Diamond, who is lead Independent Director of the boards of the firm’s US Mutual Funds and ETFs, received the award on October 10 for his research on banks and financial crises.

Doomscrolling can be a normal reaction to living through uncertain times. It’s natural to want to understand dramatic events unfolding around you and to seek out information when you’re afraid. But becoming absorbed in bad news for too long can be detrimental.

A newly published study has found that people with high levels of problematic news consumption are also more likely to have worse mental and physical health. So what can you do about it?