Despite expectations of credit contraction following the collapse of regional U.S. banks earlier in the year, data reveals a different outcome. Bloomberg reported that total outstanding loans declined by a mere $14 billion from early March through the end of June, while consumer borrowing increased by $27 billion during the same period. The Senior Loan Officer Opinion Survey also showed little change in tighter standards for loans to large and medium firms, despite the bank collapses.
Fortunately, the U.S. economy avoided any pitfalls of a contraction in bank lending and managed to resolve the debt ceiling standoff without significant financial incidents or damage. The Atlanta Fed’s real-time estimate of GDP showed a 2.4% increase in the most recent estimates for the second quarter.
Inflation continued to moderate, and the Fed’s hiked interest rates it controls appear to have worked thus far. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) decelerated from a year-over-year increase of 5.0% in March 2023 to just 3.0% in June 2023, and unemployment remained stable at 3.6%.
In turn, the markets have responded favorably, with the S&P 500 advancing 8.7% with dividends reinvested, in data from Bloomberg, for the second quarter – defying the uncertainties noted above.
Meanwhile, 10-year Treasury note yields rose slightly over the second quarter from 3.55% to 3.84%, even with expectations of more rate hikes from the Fed.
Overall, the second quarter saw strong equity returns, as economic growth continued and inflation fell. The Fed’s efforts to combat inflation did not hinder economic growth or market performance, and potential follow-on effects from the regional banking crisis and debt-ceiling standoff were also limited. As often said on Wall Street, the market climbed a wall of worry. And that it did during the second quarter.
MARKET BACKDROP
ASSET CLASS SUMMARY As of 06/30/2023
Asset Class
1 Month
3 Month
YTD
1 Year
3 Year
5 Year
10 Year
U.S. Stock
+6.19%
+10.05%
+16.17%
+18.95%
+13.89%
+11.39%
+12.34%
Global Ex U.S.
+2.96%
+2.89%
+9.47%
+12.72%
+7.22%
+3.52%
+4.75%
U.S. Bond
+0.01%
-0.38%
+2.09%
-0.94%
-3.96%
+0.77%
+1.52%
Global Bond
+0.14%
-1.40%
+1.43%
-1.32%
-4.96%
-1.09%
+0.20%
U.S. Real Estate
+6.36%
+4.64%
+4.04%
-2.65%
+5.97%
+4.57%
+6.57%
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: U.S. Stock (Russell 3000 Total Return), Global Stock Ex U.S. (MSCI ACWI Ex USA Net Total Return), U.S. Bond (Bloomberg US Aggregate), Global Bond (Bloomberg Global Aggregate), U.S. Real Estate (Dow Jones US Real Estate Index Total Return)
SECTOR SUMMARY As of 06/30/2023
Cyclical
1 Month
3 Month
YTD
1 Year
3 Year
5 Year
10 Year
Consumer Cyclical
+11.22%
+16.82%
+32.14%
+24.74%
+10.84%
+10.34%
+13.03%
Financials
+5.49%
+6.49%
-0.50%
+9.44%
+15.59%
+7.09%
+9.99%
Materials
+9.83%
+4.93%
+7.67%
+15.02%
+16.01%
+9.63%
+10.23%
Real Estate
+6.27%
+4.04%
+3.77%
-4.26%
+6.18%
+6.42%
Sensitive
1 Month
3 Month
YTD
1 Year
3 Year
5 Year
10 Year
Comm. Services
+4.70%
+14.60%
+36.20%
+21.00%
+7.28%
+6.56%
Energy
+5.06%
-0.44%
-5.41%
+18.17%
+34.95%
+6.62%
+4.30%
Industrials
+9.74%
+7.09%
+10.16%
+25.05%
+17.85%
+10.40%
+11.77%
Technology
+5.17%
+17.02%
+40.32%
+38.09%
+19.53%
+21.47%
+20.68%
Defensive
1 Month
3 Month
YTD
1 Year
3 Year
5 Year
10 Year
Consumer Defensive
+2.91%
+0.80%
+0.68%
+5.40%
+10.94%
+10.46%
+9.30%
Health Care
+5.16%
+4.05%
-1.52%
+5.18%
+11.58%
+11.64%
+12.60%
Utilities
+2.54%
-1.83%
-5.74%
-3.82%
+8.34%
+8.11%
+9.27%
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Consumer Cyclical (Consumer Discret Sel Sect SPDR® ETF), Financials (Financial Select Sector SPDR® ETF), Materials (Materials Select Sector SPDR® ETF), Real Estate (Real Estate Select Sector SPDR®), Comm. Services (Communication Services Sel Sect SPDR®ETF), Energy (Energy Select Sector SPDR® ETF), Industrials (Industrial Select Sector SPDR® ETF), Technology (Technology Select Sector SPDR® ETF), Consumer Defensive (Consumer Staples Select Sector SPDR® ETF), Health Care (Health Care Select Sector SPDR® ETF), Utilities (Utilities Select Sector SPDR® ETF).
YOU’RE INVITED INVESTMENT ROUNDTABLE
DATEAugust 17, 2023 TIME1:00pm – 2:00pm PDT
Join us for our quarterly Investment Roundtable webinar, featuring SEIA’s Chief Investment Officer, Deron McCoy, and T. Rowe Price’s US Equity Investment Specialist, James Norungolo. In this engaging session, we’ll discuss the latest developments in the dynamic world of Artificial Intelligence and how investors might benefit. Deron will also review the economic and investment landscape, including the prospects for a soft landing.
Topics on the agenda include:
Generative AI: Assessing its potential impact on investors – Promise or Peril?
How investors should be positioned in the current economic environment
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Dated Material
Dated material presented here is available for historical and archival purposes only and does not represent the current market environment. Dated material should not be used to make investment decisions or be construed directly or indirectly, as an offer to buy or sell any securities mentioned. Past performance cannot guarantee future results.
