Moore Financial Solutions First Quarter 2023
Tyler Moore • May 1, 2023
The first quarter of 2023 provided an increase in the S&P 500 of 7.03% (1). This welcomed sight to equity investors occurred as the U.S. 10 Year Treasury Note moved from 3.88%, down to 3.471% (2). Without surprise, equities rallied, as corporations were eyeing a lower interest rate, as they prefer to operate with lower rates. Q1 of 2023 continued the trend of falling rates in the open market, while the
Federal Reserve continued to raise rates. In this quarterly review, we discuss the divergence of decreasing open market rates against the increasing Federal Funds rates. We will also highlight the sudden banking crisis (felt mostly by regional banks), and the strategies surrounding rapid increases in short term rates. The Federal Reserve has been aggressively increasing rates. As mentioned in previous Moore F.S. reviews, interest rate increases help determine how quickly the economy will grow. Low interest rates generally mean an easier path to growth but may lead to an overheating economy resulting in inflation. A higher interest rate will reduce inflation but will slow the economy. Currently, Jerome Powell has raised rates multiple times to slow inflation. In many areas, a higher rate has set in, especially in ultra short-term rates. However, the Federal Reserve has struggled to get a meaningful increase on longer dated rates. Furthermore, shorter term debts (a couple years or less) have seen massive increases in yield while longer term debts, such as 10 to 30 year obligations, have increased much less rapidly. In our opinion, investors seem willing to bet that interest rates will not rise significantly over the next few years. Since investors remain willing to purchase treasuries yielding 4.5%, this keeps an invisible cap on rates. Last month the one-year U.S. treasury yield briefly went above 5% (3). Suddenly portfolio managers and fiduciaries had the solution to low yields that we’ve been searching for over the last decade. Just as suddenly, the stock market has a competitor of investment attention, the bond market. The 10 year treasury now offers approximately 3.5% yield, while only one year ago in late March of 2022, it paid only approximately 2.4% (4). This undoubtedly takes away demand from the broad stock market. We began using individual U.S. treasuries in Q1 due to the sudden surge of short-term yield. This marks the first purchases of individual treasuries for Moore F.S. as we found no need to buy treasuries with the
previously extremely low yields. This recent addition allows Moore F.S. to purchase conservative government treasuries at a higher rate than bank certificates of deposit. We note two types of hypothetical investors regarding rates and inflation. First, inefficient investors two years ago (hypothetically) who purchased extremely low yield while their money was significantly eroded due to the high inflation over the next couple years. Secondly, investors experiencing high current short term treasury rates going into what may be cooling inflation. In other words, we aim to see a yield that is significantly higher than the inflation rate. Clearly Moore F.S. intends to be in the second group and although we are not giving the “all clear” on the risk of rising rates, we feel much better at these levels than we did a year ago. As your fiduciary we aim to reduce our exposure to bonds/treasuries while rates rise and own bonds/treasuries in flat or falling interest rate environments.
If you stay up to date on Moore Financial Solutions quarterly reviews, you remember reading about Sam Bankman-Fried (S.B.F. as he is often called) and his real-life story of how not to operate a hedge fund, or any business for that matter. We recently discussed our stance on how S.B.F. and his operations were not connected to broad equity investments. This quarter the latest concern is Silicon Valley Bank (SVB). SVB was the 16th largest bank in the United States with assets of $209 Billion in December (5). Like any bank SVB took in deposits of customers and essentially drove revenue on those deposits in one of two ways; lend out deposited money for a higher rate or buy securities that offer a higher rate than the rate they pay on deposits. Examiners were able to determine the main detriment of the business was the over exposure to U.S. treasuries, like the 10-year treasury that we previously mentioned(6). Let’s dive into the fundamentals of a treasury note. A 10-year treasury note hypothetically issued today pays around 3.471% as discussed above. This investment is typically purchased for $1000, and 10 years later will mature, returning the investor’s $1,000, and each year along the way will pay interest of$34.71. Bonds contain financial risk in two major ways: inflation risk- the potential that the interest rate of 3.471% will lose purchasing power to inflation, and interest rate risk- a reduction in price of the bond due to a rising interest rate environment. Since everyone knew interest rates were rising (except this bank somehow), a limited amount was allocated to bonds in most cases. For example, Moore F.S. recently discussed that we trimmed bond positions July 14th of 2022 to let the “storm” of rising rates pass and buy back into bonds at a lower price. Furthermore, as interest rates were rising, the bonds that SVB purchased for $1000 were losing value. Yes, they would eventually mature 10 years later at $1,000 but SVB had to sell bonds to meet other obligations, and this led to a $1.8 Billion loss (7). The Sub-Prime Mortgage Crisis of 2008 taught us to understand that banks are closely related, and a “run on the banks” can cause a contagion effect. Thus, immediate action is needed. This problem is further complicated by the reaction of individuals and businesses to make a “run on the bank” and desperately/rapidly remove their deposits from the bank. To meet withdraw requests, SVB, in this case, needed to sell notes/bonds at a loss. For each $1,000 they invested in notes they only received $970 from the sale of the note, hypothetically. The more withdraw requests that came through, the more notes were sold at a loss, and this uncontrolled spiral led to the collapse of what was the 16th largest bank in the U.S. just 100 days prior. On March 26th, 2023, First Citizens Bank bought the majority of SVB deposits and stepped in to calm people’s fears (8). Markets have reacted positively, and although a few more banks have fallen, the threat of widespread bank failures seems limited. Moore F.S. aims to add a weighting to the financial sector as bank’s balance sheets remain healthy, and in our opinion, rates will remain high enough to positively impact profits. We believe most clients need to be in the stock market and willing to tolerate the volatility that comes with it. There are many things that can knock the market down; SBF, SVB, etc. and there will always be new problems coming, but we are going to continue to be disciplined in markets. Much like your home, there are always going to be issues arising, but tackling them as they come in is a much better strategy than selling your home. Likewise, volatility in markets doesn’t mean we should sell.
In our discussions with clients, we spend a lot of time strategizing stocks because ultimately more strategy goes into a stock allocation than a bond allocation. Additionally, for many clients with a long enough time horizon, a full stock allocation remains prudent. However, bonds are making a comeback, and in some cases very rapidly. The rates that Moore F.S. can offer through holdings of short-term treasuries have jumped considerably. For example, two years ago (March 28th, 2021) the U.S. 1 Year Treasury Bill offered a less than desirable yield of .065% (9). The current yield to close the quarter now stands over 72 times higher at 4.689% . Furthermore, in those same two years the U.S. 10 Year Treasury Note yield only saw an approximate doubling from 1.72% to 3.471% (10). In the opinion of Moore F.S. we believe this offers an incredible opportunity for a higher yield than bank savings, while continuing to offer a conservative strategy. In our opinion, every interest rate tick higher by short-term treasuries creates more reason to avoid rushing to pay down debts that were issued in a very low interest rate environment. Please call if you’d like to discuss these strategies as we are getting many of these inquiries.
Moore F.S. portfolios are created uniquely and individualized for every client. I not only take pride in this style of management, but I think this is truly the only opportunity to act as a fiduciary in managing the account. In the last six months I have seen an alarming rate of clients just following broadly based advice without identifying what is optimal for their individual situation. Luckily, these clients find better efficiency when they come to Moore F.S. I just want to take a moment to encourage you to ask questions and feel free to run strategies by me. Financial advisory is like health care, there may be some rules to live by that apply to most everyone, but the greatest treatment will always be individualized.
Tyler A. Moore
913-731-9105
1. https://finance.yahoo.com/quote/%5EGSPC/history/
2. https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
3. https://www.cnbc.com/quotes/US1Y
4. https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
5. https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676
6. https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676
7. https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676
8. https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676
9. https://www.cnbc.com/quotes/US1Y
10. https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
11. https://www.raymondjames.com/soundwealthmanagement/pdfs/sbbi-1926.pdf
12. https://www.marketwatch.com/investing/fund/tlt
13. https://finance.yahoo.com/quote/BTC-USD/history/
14. https://fred.stlouisfed.org/series/MORTGAGE30US
This material has been prepared for information and educational purposes and should not be construed as a solicitation for the purchase or sell of any investment. The content is developed from sources believed to be reliable. This information is not intended to be investment, legal or tax advice. Investing involves risk, including the loss of principal. No investment strategy can guarantee a profit or protect against loss in a period of declining values. Investment advisory services offered by duly registered individuals on behalf of Creativeone Wealth, LLC a Registered Investment Adviser. Creativeone Wealth, LLC and Moore Financial Solutions are unaffiliated entities.
The investment tree you planted previously may have provided more fruit in the second quarter of 2026 with the S&P 500 rising by about 15% (1). Additionally, some small cap funds such as ticker IJR (iShares Core S&P Small-Cap ETF) rose by about 19.3%, as investors felt relieved that interest rates were decreasing (2). This small cap surge was welcomed by portfolio managers such as Moore Financial Solutions, who have closely monitored the historical outperformance of small cap companies, which lagged last year. In Q2 all eyes focused on the U.S./Iran War, as investors pushed WTI crude oil prices to $112.95 on April 6th, 2026, an increase of 104% in 112 days from the December 15th, 2025, low. Investors viewed rising oil prices as a signal of higher inflation and worried that newly appointed Federal Reserve Chair Kevin Warsh might delay the interest rate cuts that many investors expected. Take five minutes every quarter, twenty minutes total for all of 2026, to better understand from my point of view why I believe the stock market is in an uptrend, the movement of other asset classes, and our thoughts of if this can continue. If a traveler arrived near Kansas City for a World Cup match, knew nothing about Moore F.S. and was curiously asking about firm values, or A.I. was tasked with doing analysis of Moore F.S. quarterly reviews, you would hear a common theme. Repetitively, we attempt to instill three thoughts regarding today's modern investor. First, stocks will move both up and down, so do not get used to 25% years, but be ready to use them to your advantage. Secondly, whether you are an individual client or Moore Financial Solutions managing $27.8 million, we are still a small fish in an enormous ocean of investors. That reality is one reason we avoid trying to time the market or become overly concerned with short-term movements. The intention is not to make either party feel small, rather create a metaphor that you are subject to the tide going up or down and remind you that it will do both. Lastly, this is not Mayberry where Wally's Filling Station, Floyd's Barbershop, and Mayberry Diner represent most of your commerce. In fact, you are likely tied deeply into a global economy with dozens of moving parts from tariff rules to the Strait of Hormuz. We will dive deeper into that strait and use West Texas Intermediate prices for our conversation. Last quarter we honed in on the logistics of the Strait of Hormuz stating, “That roughly 21-mile-wide body of water, the Strait of Hormuz, realistically can create a recession.” In other words, the economy is increasingly global, and a small shipping route over 7,500 miles from Kansas City impacts your prices for gas and thousands of other items. Moore F.S. took the opinion that the oil price spike would be short lived and spoke freely to clients about this view. We did not take this viewpoint on a hunch, rather we studied the backwardation of WTI crude oil prices. This unique backwardation of oil prices looked similar to the inverted yield curve our firm witnessed for a couple of years from 2022-2024 (you can learn more about yield curve inversion in the previous Moore F.S. reviews written Q3 2024 and Q3 2025). In our backwardation forecasting we did not feel obligated to predict the price of oil, rather we used crude oil futures markets to determine where traders were imagining oil prices. This reassuring feeling of a decrease in oil prices combined extremely well with our buy and hold philosophy. In other words, we did not panic sell stocks in fear that oil might hit $200/barrel, as multiple firms said was possible. Since 1985, the crude oil market has been in contango (a positively sloping price curve) around 42% of the time. It has been in backwardation 58% of the time as measured by the price difference between the front-month contract and contracts for six months in the future (4). Higher fuel prices fueled inflation concerns. As a result of an increasing oil price economy, traders drove interest rates higher as well. An economy that imagined a couple rate decreases for the year now was eyeing a spike in inflation and had to reposition interest rates. As a result, Wall Street pushed the 10-Year U.S. Treasury rate from 4.318% to 4.469% in Q2. Though we aim to avoid interest rate prognostications, we firmly believe the United States will rejoin a decreasing interest rate environment for the remainder of the year, at least from the 4.469% levels, barring geopolitical shocks to the system.
The past 35 days have humbled investors as we witnessed the S&P 500 lose approximately 6% from February 25th into the quarter's close. The S&P 500 finished the entire quarter 4.6% lower, which represents the first losing quarter since Q1 of last year, in which the S&P 500 lost about 4.59%. Much like an emotional play or movie, the market offered three scenes of varying benefit to investor portfolios. Scene one was brief but fruitful. In these first 12 days of the year the S&P 500 rose about 1.92%. Scene two left investors leaning on the emotional lessons learned from 2025's market downturn, with the S&P 500 moving about 9% lower from day 13 of the year until March 30th. Scene three flashed quickly and only represented one day. On this last day of the quarter, the S&P 500 meaningfully rose about 2.9% in an effort to heal a portion of the quarter's losses. I believe, based upon my nearly 14 years of money management, that stock market history doesn't repeat itself, but it does rhyme. Though I'm not predicting a positive year for the S&P 500 (and admittedly not in the business of making such predictions) this year's chart for the broad stock market looks somewhat like last year's. Those first quarter '25 stumbles were later looked at as a massive buying opportunity, symbolizing the power of "buy and hold" as it relates to stocks. Only time will tell if these stock market worries are warranted and if there will be continued damage to stock portfolios because of the conflict in Iran. Additionally, the market is eyeing oil price increases, interest rate increases, various geopolitical risks, and the additional unforeseen risks on the horizon. Or are stock market investors currently pricing in many areas of worry, all of which will subside in the coming weeks? Dive into the quarter's review in which I attempt to illustrate investing through my eyes, discuss quarterly geopolitical events, and speak to market moving factors of Q1 and investor emotions as a result. Use this tool to educate yourself and reduce worry or fear as it relates to investing.
