Market Memo

October 2022 – By Kyle Rohrwasser

Just in time for Halloween, the 60-40 portfolio model has risen from the grave in just a few short months.  A 60/40 portfolio has long been an industry standard, representing 60% equities with a ballast of 40% fixed income.  Between October of 2018 and August 2020, we saw 10-year treasury rates drastically move down from 3.23% to 0.55%. That created a paradigm shift towards equity over fixed income. Fixed income prices move in the opposite direction of their yields.  As yields drop, prices increase, and vice versa.  This inverse relationship is known as Interest Rate Risk and is measured by a data point known as duration.  During the summer of 2020, with fixed income yields pressed lower, adding interest rate risk almost guaranteed losses in the event the Federal Reserve increased interest rates.  This had some analysts claiming the 60/40 portfolio was dead, as the ‘safe’ portion of the portfolio (fixed income) carried a high degree of interest rate risk while simultaneously paying very little yield.  This dynamic caused many investors to allocate even more to equities to compensate for the poor fundamentals within the fixed income market. 

Market Memo

May 2022 – By Kyle Rohrwasser

The war in Ukraine continues as governments look toward a slowing global economy with continued inflationary pressures. News outlets have decreased their war coverage, but the conflict and its economic impact remain real. European countries have seen rising energy prices and COVID lockdowns in China have added to supply chain woes. In the United States, we feel these effects domestically through rising food and gas costs mainly. Based on the rising value of the dollar to other currencies, it implies that we are in better shape than most other economies.