2023-Q1 Market Commentary

Following the worst year since 2008 for US stocks, the first quarter of 2023 was a positive shift. However, returns for the major US indices varied considerably as the S&P 500 ended the quarter up 7.03%, the Dow Jones Industrial Average gained a modest 0.38%, while the Nasdaq Composite soared 16.77%. Growth fared well in the quarter as it outperformed value. The same can be said for large caps as they outpaced small caps during Q1.

Within the US Treasury market, interest rates generally increased in the ultrashort-term and decreased in the short- to long-term segment. After a disappointing 2022, when high-quality bonds did not hedge equity market downside risk, fixed income bounced back with a positive return for the quarter. The Federal Reserve continued to raise interest rates and delivered a 0.25% hike both times it met during the quarter. These follow previous increases of 0.50% and 0.75% seen in Q4 of 2022. Inflation continues to take its toll on consumers as monthly wage growth has lagged inflation going on two years now. The Federal Reserve is expected to raise rates at least one more time and hold these levels through year end.

On Friday, March 10th, regulators took control of Silicon Valley Bank as a run on the bank unfolded. Two days later, regulators took control of a second lender, Signature Bank. With increasing anxiety, many investors are eyeing their portfolios for potential exposure to these and other regional banks.

The market outlook still remains uncertain going forward as corporate America continues to engage in layoffs and hiring freezes. Home mortgage and auto loan rates have doubled since last year, which will slow growth as the cost of capital increases. Stock ownership remains a good long-term investment option to help keep pace with the impact of taxes and inflation.