Equity markets performed well during the first quarter of 2023. However, performance was narrow in scope, driven by a rebound in the technology sector which had been beaten up during 2022. The first quarter witnessed a continuation of elevated inflation, which drove the need for further interest rate hikes by central banks. It appears that these higher interest rates are beginning to have their intended effect, with inflation easing and the economy cooling off. All indications now point to a slowing of both the pace and scale of any future rate increases.
The record setting pace of rate increases has driven an equally rapid devaluation of overpriced assets and wreaked havoc in financial markets. This has stifled residential and commercial real estate sales as well as curtailing private equity and venture capital investments. It has also contributed to the failure of two regional banks in the United States and the emergency acquisition of Credit Suisse by the UBS Group of Switzerland. We believe these failures are isolated, reflecting poor management and board decisions and will not lead to contagion within the financial sector. Our focus on large, well capitalized, responsibly managed banks operating within a robust regulatory environment offers significant downside protection and, more importantly, superior long term growth opportunities.
The current economic slowdown increases the likelihood of recession. Whether it is mild and shallow, or longer lasting and more severe, remains to be seen. That said, we remain positive in our outlook. While conducting recent management interviews and attending company presentations, management teams have confirmed their revenue and earnings guidance for the year and are anticipating improved conditions and financial results for 2024. We use a targeted approach to investing in high quality companies characterized by strong management teams, solid balance sheets and steady growth prospects. These types of companies are best suited to withstand volatile times and lead the early stages of a recovery.
While the current economic circumstances cause us to proceed cautiously, we are optimistic. During the first quarter we were more active in making changes to your portfolio, positioning it to both endure a recessionary period and take advantage of the ensuing recovery. We will remain vigilant on your behalf as we go through this next economic cycle.