Economic Update 2023
2nd Quarter Economic Update
US equities were led by a handful of stocks and outperformed international equities for the quarter and year. Despite ongoing challenges, positive growth and inflation surprises helped US equities (S&P 500) gain 8.7% and 16.9% for the quarter and year, respectively. This marked the third consecutive quarter for positive returns and the best first half since 2019. However, returns have been entirely driven by the market’s largest stocks, with the top 10 companies in the S&P 500 accounting for more than 95% of the index’s year-to-date performance. In the international markets, a weaker US dollar and strong economic data generated positive returns for developed markets. Emerging markets remain the laggard, as recent economic data from China disappointed relative to expectations.
Bond returns were mixed in the second quarter. Bond yields, which move inverse to bond prices, rose as the market adjusted its expectation that the Fed would keep interest rates higher for longer. As yields went up, US fixed income lost 0.8% for the quarter but increased 1.8% for the year. Long-term bonds with greater sensitivity to interest rates were hit hardest. On the other hand, lower-quality bonds, such as high-yield bonds, made modest gains of 1.7% during the second quarter and 5.4% for the year. High-yield bonds are less sensitive to interest rates, as their performance is instead more closely tied to the stock market.
We expect less volatility through the second half with net positive returns for both stocks and bonds at year end. The Fed’s interest rate increases seem to have cooled advancing inflation, and strong employment numbers indicate a strengthening economy. Recent GDP numbers are above expectations, indicating a significant reduction in the chance of a recession.
We are pleased to bring you this brief quarterly market recap. If you have any questions about your portfolio, or your circumstances have changed that would dictate a planning review, please call our office to make an appointment. It is our pleasure to assist you in your planning and portfolio management.
Timothy G. Redmond, CFP®, AIF® MSFS
CA Insurance License: 0687279
Investors cannot invest directly in indexes. The views stated in this letter are not necessarily the opinion of SagePoint Financial, Inc.and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability, and differences in accounting standards. A diversified portfolio does not assure a profit or protect against loss in a declining market.
This report is for informational purposes only, and is not a solicitation, and should not be considered investment advice. The information in this report has been drawn from sources AssetMark believes to be reliable, but its accuracy is not guaranteed, and is subject to change. Investing involves risk, including the possible loss of principal.
This material was prepared by AssetMark Trust, Inc., figures by Morningstar Inc. They do not necessarily represent the views of the presenting party, nor their affiliates. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not beconstrued as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such.
The MSCI ACWI (All Country World Index) is a free float‐adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.
The Bloomberg Barclays Global Aggregate Index is a measure of global investment grade debt from 24 local currency markets. This multi‐ currency benchmark includes treasury, government‐related, corporate and securitized fixed‐rate bonds from both developed and emerging markets issuers.
The Standard & Poor's 500 Index ‐ S&P 500 is a market‐capitalization‐weighted index of the 500 largest U.S. publicly traded companies by market value. The S&P 500 is a market value or market‐capitalization‐weighted index. The MSCI ACWI Ex‐U.S. is a market‐capitalization‐weighted index maintained by Morgan Stanley Capital International (MSCI). It is designed to provide a broad measure of stock performance throughout the world, with the exception of U.S.‐based companies. The MSCI All Country World Index Ex‐U.S. includes both developed and emerging markets.