Fortitude Focus – January 2024: When Safe Havens Turn Stormy

Explore the impact of Fed rate hikes in our blog post ‘Bond Volatility: Safe Havens Turn Stormy,’ revealing hidden risks in ‘low risk’ bonds amid the 2022 market collapse.

JANUARY 202 4 – MONTHLY UPDATE
FORTITUDE FOCUS
Investment Department Fortitude Family Office | fortitudefo.com
THE STORY
Historic Crash In Treasuries

10Y Roller Coaster To Nowhere

Amplified Treasury Volatility

*Sources: Charts produced internally using historical
price data from Morningstar Direct as of 1/2/2024,

BOND VOLATILITY:
WHEN SAFE HAVENS
TURN STORMY.
The bond market pain induced by
the Fed’s recent rate hiking cycle
raises an important question: Just
how risky are “low risk” bonds?
We often think of bonds as stable,
predictable components of a
portfolio (which is generally true
when held to maturity) but the
principal collapse which debt
assets experienced in 2022, serves
as a poignant reminder that even
“risk-free” assets can carry
considerable near-term risks.
While we all know it’s been a
bumpy ride for fixed income over
the last two years, the seismic
magnitude of the moves is historic
and should not be easily dismissed.
For example, treasury valuations
were so inflated by central banks’
zero interest rate policies in
2021, that a normalization of
rates to the 5% range caused the
Bloomberg Agg Treasury Index to
realize a drawdown several times
larger than any loss it had
experienced in the last 50 years.
Ultimately, fixed income’s
tumultuous journey illustrates an
important lesson: portfolio risks
cannot be measured simply
based on recent price stability.
Instead, effective risk
management requires that we go
beyond strict empirical analysis
to also think critically about the
fundamental risks present in the
market – including those which
we have yet to witness in the
historical record.
UPCOMING EVENTS
Monthly CPI – 1/11
MLK Day (Closed) – 1/15
FOMC Meeting – 1/31

“The Market Is
Filled With People
Who Know The
Price Of Everything,
But The Value Of
Nothing.”

  • Philip Fisher
    6.64%
    9.93%
    Last 10Y Last 2Y
    10Y Treasuries Realized Volatility
    1.5X
    -20.00%
    -18.00%
    -16.00%
    -14.00%
    -12.00%
    -10.00%
    -8.00%
    -6.00%
    -4.00%
    -2.00%
    0.00%
    2/1/1973 1/31/1983 1/31/1993 1/31/2003 1/31/2013 1/31/2023
    Bloomberg Aggregate Bond Treasury TR USD
    2.50%
    3.00%
    3.50%
    4.00%
    4.50%
    5.00%
    5.50%
    10Y Treasury Rate In 2023
    FORTITUDE
    FLASHBACK

Gold Prices Reached An All-Time
High: London’s LBMA Gold Price
benchmark hit an all-time high of
$2,069.4 per ounce in December
rising 12.7% for the year amidst
increased expectations for Fed rate
cuts in 2024. (Reuters)
Alaska Airlines To Acquire
Hawaiian Airlines: Alaska Airlines
will pay $18 a share, roughly $1.9B,
for Hawaiian Airlines. If approved,
the brands will still operate under
their respective brands. (CNBC)

Coal Usage Expected To Reach
Record High: The IEA forecasts that
global coal consumption is expected
to reach a record high this year,
surpassing 8.5B tons, as demand in
emerging and developing economies
remains strong. (Reuters)
Toshiba Delisted After 74 Years:
After 74 years on the Tokyo
Exchange, one of Japan’s biggest
conglomerates is being taken
private by private equity firm Japan
Industrial Partners (JIP). (Reuters)
WHAT
HAPPENED?
EQUITIES JUMPED
US equity markets rose in December
with the S&P 500 up 4.5%. Global exUS equity markets also rallied with
the MSCI World ex-US Index up 5.7%.
FUND MONTH* YTD*
US Large 4.5% 26.3%
US Mid 8.7% 16.4%
US Small 12.8% 16.0%
Global
ex-USA 5.7% 16.9%
Int’l Dev 5.3% 18.2%
Emerging 3.9% 9.8%
FIXED INCOME
BOUNCED
Fixed income markets continued to
rally in December as the market
priced in expectations for Fed rate
cuts pushing the Bloomberg Agg
Index up over 3.8% in the period.

FUND MONTH* YTD*
Ultra-Short 0.4% 5.3%
Short 1.1% 4.2%
Core 3.8% 5.5%
Long-Term 8.6% 2.2%
HY 3.7% 13.4%
US TIPS 2.5% 3.7%
Intl Bonds 4.2% 5.7%
EM Bonds 4.3% 9.0%
ALTERNATIVES
GAINED
Alternatives continued to produce
stable returns and income amidst the
rise in other risk-on asset classes.
1Due to reporting lags, some data represents the latest
return as of the month prior to this period.