Since I last wrote to you, a lot has changed in financial markets…

The banking crisis has calmed (for now), the volatility index is down by almost half, official inflation data continues to cool, and stock indices have rallied 5-10% across the globe.

On Wednesday, Morgan Stanley’s CEO James Gorman stated “In my view we are not in a banking crisis”.

Many US banks reported Q1 earnings this past week and so far the stock price reactions have been mostly positive.

Are we out of the woods? And are stocks poised to keep rallying?

Well I’ve mentioned the good news, but let’s talk about the lingering concerns...

There’s another Fed meeting on May 3rd and the market is currently pricing in a 86% probability that the Fed hikes short term interest rates to over 5%.

We’re also on the cusp of a major political fight between Republicans and Democrats over the national debt ceiling. There’s a non-zero chance that hyper partisan politics lead to a technical default on US debt repayments for a few hours.

Hopefully that entirely avoidable disaster scenario doesn’t occur!

There’s also the broader question of how the economy is faring, with some leading indicators suggesting mild recession could arrive later this year.

2008 also proved that a banking crisis often takes several quarters to fully rear its ugly head.

Standing in the way of a renewed bull market is this wall of worry.

It’s a confusing time. So what am I doing from an investing perspective?

Not much at all!

My strategy lately has been “T-bills & Chill”

The best part of the current investing environment is that we’re getting paid to wait. Short term treasury bills (“T-bills”) and money market instruments are paying 4%+ annual rates of interest.

I still own many of my core stock holdings but I have excess capital parked in boring instruments earning some interest. My risk taking appetite is low.

I’m not forced to predict the future perfectly to earn a return and I can wait a little while for some extra clarity.

HOWEVER, it’s also true that investors who wait for the “all clear” signal in financial markets will never get off the sidelines. There’s always something to worry about in financial markets.

Waiting too long isn’t the best strategy especially for younger investors.

My current view is that the Fed will not hike interest rates beyond May, which could provide some bull market fuel once we’re past the debt ceiling showdown.

There is a reasonable chance the economy can re-accelerate later this year if we get a few months of stable rates and relative quiet in the banking system.

I can see the path to becoming more bullish & active, but for now making few moves feels right.

It’s not exciting or sexy, but sometimes doing nothing is the best course of action in investing.

Warren Buffett famously said “I call investing the greatest business in the world because you never have to swing…there’s no penalty except opportunity lost”

I feel pretty comfortable watching some pitches go by this spring, but I’ll be ready to take some big swings soon enough!

Happy Sunday,

Travis

P.S. - This is a big week for corporate earnings reports outside of the banking sector so we'll know a lot more about the state of the economy by this time next week. Stay tuned 🙂

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