Market Review - Quarter 3, 2023
Source: FactSet
For the quarter, global markets were sent lower by rising interest rates and oil prices. Stocks and bonds fell as investors feared a resilient economy would lead to higher interest rates for longer. In US equities, we saw a reversal in trend among the narrow group of stocks nicknamed the “Magnificent Seven¹”. These stocks associated with the artificial intelligence boom had provided the market with most of its gains to date; however, the weight of higher interest rates sent them lower during the quarter. Zooming out, surprisingly, even amid concerns of a potential U.S. recession, the S&P 500 is still up 13.1% year-to-date.
Within the S&P 500 sectors, technology stocks struggled while energy stocks gained on supply concerns for oil. Finally, higher interest rates sent real estate lower on fears of a slowdown in the housing market.
In international stock markets, a stronger U.S. dollar and weakening growth in Europe and China weighed on returns, with developed and emerging equities down by 4.1% and 2.8%, respectively, during the quarter but maintaining positive returns for the year.
In the bond market, interest rates rose to their highest levels since 2007, sending bond prices lower. Bonds with lower interest rate sensitivity, such as the riskier high yield, performed best.
Finally, across other asset classes, commodities gained as supply cuts from key players sent oil prices higher for the quarter. Commodities remain negative for the year, however, on weaker demand. Gold lost its shine, too, as the dollar and cash have held up well.
1 - “Magnificient Seven” are Apple, Amazon, Alphabet (Google), Meta (Facebook), Microsoft, Nvidia, and Tesla.
