It’s nice to see that May has started out by bringing us some beautiful weather! Spring is one of my favorite times of the year. The grass returning from under the snow and moving from brown to green, flowers and trees starting to bud, and new growth popping up all around us. It continues to provide a reminder that change is always happening all around us. Change is one of the few constants in the world in which we live, and we must continually adjust as those changes occur.

As I sit here writing this for you, we are experiencing a potential crisis in the banking system with the federal take over of Silicon Valley Bank and Signature Bank. To many, this was a shock to the system. The FDIC and the Fed came in and essentially guaranteed all deposits (even those above the $250,000 guarantee level). It is yet to be seen if this change in stance will have any long-term impacts, but it is certainly a change in policy. For many, the idea of a bank failure is foreign and something that shouldn’t happen given the reforms put in place following the Global Financial Crisis. But, according to the FDIC website, the two banks brought the total to 31 banks that have failed since the beginning of 2015, or an average of almost 4 per year. The biggest difference with these two was the speed to which the assets were being withdrawn and creating a run, and the significance of Silicon Valley Bank to the start-up and tech industries. There will be much more to come on the what’s, whys, and how’s, of these failures – at the end of the day their impact on the banking system and the stability of your deposits appears to be muted.

The S&P 500 finished the first quarter up about 7% but remains off of it’s all-time high by about 14%. Since the start of 2020, the S&P 500 is up just over 26% total, for an average of almost 9% per year, which is in line with long term market averages. While it is easy to focus on the change from last year,

in better context the market is still doing what it is supposed to be doing to support your growth needs. Small company stocks started the year off the best but finished the first quarter lagging large company stocks by about 5% in the US (and international stocks slightly outperformed US). We continue to monitor the performance and health of international stocks, but currently do not own international developed stocks in our internal portfolios. Though, we do continue to hold strong Emerging Market positions. We expect volatility to continue throughout 2023 as the world adjusts to moderating inflation and high interest rates. Though, with a continued tight labor market, we don’t see a recession occurring in the US in 2023 currently. We will monitor these factors and how it impacts your portfolios, but at this time our stock positioning will remain consistent.

Aggregate bond indexes ended the quarter with a positive year-to-date return, following back-to-back negative return years. With yields having risen substantially over the last couple of years, price performance has some cushion with the available income component. Treasury bills continue to offer favorable returns while maintaining some liquidity and optionality vs. bank CDs, and continue to be a strong option for excess bank cash. Over the next several months, we will be extending the duration in our bond portfolios to take advantage of the additional yield that is available. If you remember, we have been purposefully short in duration for many years, which is a preferred position in a low and rising rate environment. Now that rates have gotten closer to their top (and popular opinion has the FED cutting rates slightly either later this year or next year), a movement out the yield curve is warranted. As always, we will work to provide you with the appropriate levels of income and stability within your fixed income assets because total return is what matters when it comes to fixed income.

Just as spring is a time of rebirth and new growth, it is a great time to sit down and review your current planning, any upcoming changes, or goals, and allow us to help you understand how any of the varying things going on in the world may or may not be impacting to you. It can be easy to fall victim to the extreme highs and lows as presented by all of the varying media outlets, but it is through proper planning that you can limit the impact of potential changes and take advantage of the opportunities presented.

Personal individualized planning will always yield your best results and will continue to be the core focus of everyone on our team at Midwest Financial Group. We look forward to talking more as 2023 evolves. Remember: when in doubt, shut off the TV, throw away the newspaper, unplug the computer, put down the smart phone, and meet with your advisor when questions arise.

This was a substantial increase from 40.01% in 2018.