Quarterly Client Letter – 2nd Quarter 2023

Over the course of the first quarter of 2023, capital markets around the world continued their advances off the lows of 2022, albeit in very choppy fashion.  The year so far has marked a complete reversal from last year, with the worst performing stocks of 2022 leading the way in 2023, and vice versa.  (As an aside, it is interesting to note that while the calendar is a somewhat arbitrary starting and ending point for measuring returns, it is not unusual for inflection points to occur precisely as one year ends and another begins, due in large part to the effects of tax-loss selling and repositioning by large institutional investors.)  Large U. S. stocks, as measured by the S&P 500, rose 7.5% in the quarter.  International stocks, in a welcome change, outpaced U.S. stocks, rising 8.6%.  The laggards for the quarter were small-cap stocks, up 2.7%.  Bonds gained about 3%.  But growth stocks outperformed value stocks by a wide margin (more on that below), negatively impacting the relative performance of many of our funds.

Within large-cap domestic stocks, there was wide divergence that merits additional comment.  We don’t often refer to the Dow Jones Industrial Average or the NASDAQ Composite in our commentary, but their results year-to-date highlight the dichotomy: while the Dow only delivered a 0.9% return, the NASDAQ gained  17%!  Again, it is worth noting that this variance simply unwound last year’s dramatic outperformance by the Dow over the NASDAQ, but it also highlights where the strength and weaknesses were within the market. Financial stocks declined (disproportionately impacting value strategies and the Dow) and large-cap technology stocks gained (disproportionately impacting growth strategies and the NASDAQ).  This divergence is further illustrated by the outperformance of the Russell 1000 Growth Index vs. the Russell 1000 Value Index:  14% vs. 1%.

Interestingly, in the early part of the quarter, value was actually leading growth, but the failure of Silicon Valley Bank caused a steep sell-off in several specific regional banks deemed most at risk of a similar fate, and indiscriminate selling in the rest of the financial sector, as fears of another financial crisis took hold.  (A fear, by the way, that we see as overblown.)  As money left the banks (meaning both the withdrawal of deposits and the selling of shares), the greatest beneficiaries were the stocks deemed to be the least at risk in a financial crisis or credit crunch, namely the large-cap tech stocks.  We would caution that we don’t see this as the beginning of a trend but rather an idiosyncratic reaction to a specific event. 

However, even if the failure of a small number of banks does not lead to contagion that results in a full-blown crisis, we do expect a tightening of credit that will have longer-range implications.  This has added yet another layer of complexity to the Fed’s upcoming decisions on interest rates. 

Which brings us to the look forward.  We still expect all the markets in which we invest to be highly sensitive to the outlooks for inflation and interest rates.  The problem is that the Fed and the bond market are sending seemingly conflicting signals.  The Fed is telling us to be prepared for continued rate increases (although they’ve indicated we may be near the peak of the current cycle), and for rates to stay higher for longer.  The bond market, on the other hand, vis-à-vis the steeply inverted yield curve, is telling us a recession is imminent and yields are headed lower.  Finally, the stock market seems to be pricing in hope that, somehow, the Fed can get inflation under control without significantly higher rates and without triggering a recession.  To reconcile the mixed messages from the Fed and the bond market, we must assume that the Fed will continue to raise rates, but only until the combination of tighter financial conditions and higher rates causes a steep enough recession that they are forced to start cutting rates again.  So, either we get higher rates and a strong economy, or lower rates and a weak economy.  But we do not foresee a world in which we get lower rates and a strong and growing economy.  Which is a long-winded way of saying that stocks may be currently pricing in an unrealistically rosy set of circumstances. 

Notwithstanding our somewhat cautious near-term outlook for stock prices, we think the most probable outcome is that any recession will pave the way for both lower rates and an economic recovery to follow, and that stocks will, and should, remain the asset class of choice for long-term investors.  In the meantime, we are heartened that during volatile periods for stocks we can earn yields in the form of dividends on stocks and interest on bonds, Treasury securities, and even money market funds that we haven’t seen in years. 

As a final matter of housekeeping, please remember to keep us informed of any changes to your contact information or financial circumstances.  And please make sure your beneficiary information is up-to-date and consistent with your estate plan. 

Eddie Carlisle     Doug Muenzenmay        Julius Ridgway

SoundPath Investment Advisors



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Sissy Moreland

Client Services Trading

A graduate of Mississippi State University, Sissy joined Medley & Brown in 2017, but her career goes all the way back to 1990 when she was the merchandise director for four years at Phi Theta Kappa. She was also Customer Service Manager and Marketing Development Manager at Crystal Springs Apparel from 1994 to 2005. From 2005 to 2017, she was Manager of Sales Administration at Skyhawke Technologies. Thanks to her considerable operations and administrative experience, Sissy oversees trading and assists with most back-office operations for the firm. Staying so busy at work requires Sissy to recharge her batteries outside the office from time to time which she does by running, reading, enjoying a leisurely brunch, and watching the Saints play football.

Beth Braswell

Client Services Coordinator

Beth spent four years in the investment world before joining Medley & Brown in 2004 as our operations coordinator. She and her husband Robbie are busy parents to identical triplet daughters, so not surprisingly, some of Beth’s favorite things to do are napping and relaxing on the beach when she actually finds the time. Beth also enjoys taking short walks to the pool, attending concerts, and going out of town for long weekends. Beth loves her Mississippi State bulldogs and currently has four dogs, three cats, and three grandcats because having three children simply isn’t enough. No wonder her operational skills are so exceptional.

Doug Muenzenmay, CFA, CFP®

Senior Advisor   |   Principal

When he’s not enjoying the outdoors or attending his children’s school and sporting events, you can find Doug studiously researching investments for his clients. His career began in 1991 after graduating from the University of Iowa with a bachelor’s degree in economics. He spent 17 years in trust investments at three different banks before joining Medley & Brown in 2010. Doug also got his MBA from Mississippi College and served as an adjunct professor in finance there from 2007 to 2013. Married to his wife Sharon since 2001, Doug is a Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), and a board member of the CFA Society of Mississippi.

Eddie Carlisle, CFP®

Senior Advisor  |   Principal  |  Chief Compliance Officer

Eddie’s extensive education includes a B.S.B.A. in accounting, with special distinction, from Mississippi College in 1994, along with a J.D. from Vanderbilt University and LL.M. (Master of Laws) in taxation from the University of Florida. But it’s what he’s learned outside of school and work that really stands out. He’s an Eagle Scout, which taught him a great deal about honesty and hard work from an early age. He learned even more earning black belts in Taekwondo, Hapkido, and Hanmudo. Oh, and he studies the Korean language in his spare time as well. Additionally, Eddie serves as an adult leader for Scout Troop 164 in Madison. He is a past board member of Hope Hollow Ministries, the Central Mississippi Down Syndrome Society, and the Mississippi Corporate Counsel Association. Eddie is currently a board member of the Woodward Hines Education Foundation. He enjoys spending time with his wife, Sarah, and their three children—Andrew, Caroline, and Emma. 

Julius Ridgway

Senior Advisor   |   Principal

Judging from his background, you’d think investments and other financial matters were all Julius cares about. After all, he has two decades of direct investment experience and spent the previous ten years involved in banking and real estate. Julius also received a masters degree from the London School of Economics in 1998, an MBA from Millsaps College in 1993, and a history degree from the University of Mississippi in 1990. But his true passions include driving sports cars on racetracks or twisty mountain roads, running ultramarathons, and taking road trips with his wife and son. He’s worked here since 2002 as a Chartered Financial Analyst (CFA) and member of the CFA Institute while also serving as an adjunct instructor at Millsaps College and board member of New Stage Theatre. It takes major dedication to tackle all these responsibilities—sort of like training for all those long distant runs—but Julius enjoys every minute of the grind. And when it’s time to slow down, Julius finds the best way to clear his head is taking long hikes in the mountains on all those road trips.