Q2 2023 Market Review
Following the turmoil of 2022, U.S. equities led a substantial rally in the first half of 2023, with growth stocks making a remarkable recovery. Value stocks, on the other hand, advanced modestly. Large U.S. technology companies led the growth-stock rally after languishing in 2022 and drove the S&P 500 to end the first half of the year up 17%. The international markets were a mixed bag, with European and Japanese stock markets posting solid gains, but emerging market company gains were muted, with concerns around China’s growth. The bond market continued to face headwinds as the Federal Reserve moved interest rates higher, putting pressure on bond prices.
Economic Indicators and Outlook
Better-than-expected economic data continues to surprise forecasters and is leading economists to believe that policymakers and central bankers can avoid a recession in 2023. However, the second half of 2023 brings about questions regarding the sustainability of the stock market rally, with the Federal Reserve continuing to raise interest rates.
Corporate Earnings and AI
Corporate earnings reports have been encouraging, with a significant 78% of S&P 500 companies reporting positive earnings surprises. Interest in artificial intelligence surged, evident in the 41% increase in mentions during conference calls. The anticipated annual increase in economic productivity due to AI added to this enthusiasm.
S&P 500 Index Domination
After a dismal 2022, large U.S. technology companies started the first half of 2023 with eyepopping returns, driving the S&P 500 to recover much of the losses incurred in 2022. Per the chart below, the largest five and ten companies that compose the index make up almost a quarter and a third of the weighting, respectively. Given that these few companies have had outstanding performance, the index’s performance has been materially impacted positively this year. However, investors should remember that this dynamic is a two-way street, and there’s risk embedded in the index because of the concentration in these few large companies. At Valley Peak Financial, we take the approach that diversifying your stock market holdings globally and investing in a more defensive manner reduces risk and may allow you to take advantage of opportunities across market cycles.
We remain vigilant and invest according to your individual needs.
With you for the long haul,
Carter Ellis, CFP®
Founder
Disclosures:
Past performance is no guarantee of future success. This material is for informational use only and should not be considered investment advice.
The opinions expressed are those of Guardian Wealth Advisors, LLC. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward looking statements cannot be guaranteed. Investing involves risk. Principal loss is possible.
Investment advisory services offered though Guardian Wealth Advisors, LLC D/B/A Valley Peak Financial. Guardian Wealth Advisors, LLC ("GWA") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about GWA's investment advisory services can be found in its Form ADV Part 2, which is available upon request. GWA-22-35
