Second Quarter Investment Commentary, 2023

Jul 20, 2023

Investment returns during the second quarter were good once again. This marks the third straight quarter of positive returns for US and International stocks.

Second Quarter Investment Commentary – Overview

  • Economic Overview
    • Gross Domestic Product (GDP) Revised Higher
    • Inflation Continues to Trend Down
    • Unemployment Rate Remains Low
    • Tech Layoffs Lessen
  • US & International Stock & Bond Performance
  • Looking Ahead – Low Volatility This Year

Economic Overview
At the end of last year, many economists forecast a recession in 2023. In fact, 63% of economists surveyed by The Wall Street Journal believe one would happen.

While there is still plenty of time left this year, those predictions seem unlikely, as the US and global economy have done very well:

  • US gross domestic product grew at a 2% in Q1 (revised up from 1.3%) (source)
  • Inflation has declined 12 consecutive months, from a peak of 9% in June, 2022, to 3% in June, 2023. 
  • Unemployment remains low, at 3.6%, down from a high of 14.7% during the pandemic.
  • Layoffs in tech are on the decline.

Economic risks remain, of course, but investors who stuck with –  or added to – their portfolios have been rewarded.

US Stocks
US stocks rose 8.4% during the second quarter, and are up nearly 19% over the past year:

Looking at the S&P 500 (the largest 500 stocks in the US), that index had the 13th best start to a calendar year on record (source):

International Stocks
International stocks were up during the quarter, but not as much as the US market.

Over the past year, returns for developed international stocks (countries like Canada, Germany, and Japan) and US stocks have been virtually identical.

Emerging Markets (countries like Brazil, India, and Mexico), weighed heavily by weakness in Chinese stocks, were modestly positive over the quarter and year.

Bonds
The bond markets were flat to modestly negative for the quarter.

The US bond index, the Bloomberg Barclays Aggregate Bond Index, was down just under 1%.

Overseas, international bonds eked out a small gain.

For investors holding municipal bonds, those have been one of the strongest sectors over the last year.

Looking In The Rear View – Low Volatility in 2023
Despite major geopolitical headlines, bank failures, debt ceiling tensions and more throughout this year, if you feel like things have settled down a little bit and volatility has declined, you’d be right.

The illustration below shows how many days the S&P 500 has moved up or down more than 1% each year:

We’re on pace to experience less than half of the number of big daily moves that occurred last year.

Given that we have roughly 250 trading days in a year, in 2022 the market moved by more than 1% nearly every other day.

As always, please reach out if you have any questions or would like to connect.

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Past performance is no guarantee of future returns.

The graphs and charts in this commentary are for illustrative purposes only and not indicative of any actual investment. Index returns do not reflect any fees, expenses, or sales charges. It is not possible to invest directly in an index. Stocks are not guaranteed and have been more volatile than other asset classes. Historical returns were the result of certain market factors and events which may not be repeated in the future. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgement in determining whether investments are appropriate for clients.

This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities.

  1. Data from Morningstar. Returns over one year are annualized.

Disclaimer: Investments are not guaranteed and are subject to investment risk, including possible loss of the principal amount invested. Past performance is no guarantee of future results. All allocations and opinions expressed are as of the date of this presentation and subject to change. The information contained herein does not constitute investment advice or a solicitation. Information obtained from 3rd parties is believed to be accurate, but has not been independently verified.

The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material is presented solely for information purposes and has been gathered from sources believed to be reliable, however Think Different Financial Planning cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Think Different Financial Planning does not provide tax or legal advice, and nothing contained in these materials should be taken as such. As always please remember investing involves risk and possible loss of principal capital. Advisory services are only offered to clients or prospective clients where Think Different Financial Planning and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Think Different Financial Planning unless a client service agreement is in place.