Perspectives Newsletter: Q2, 2023
Liquidity, which was pumped back into the markets in response to the banking crisis in the first quarter, continued to pour in through April and May as the government worked to avoid breaching the debt ceiling. The result was a quarter of performance that looked similar to the first quarter and an official marking of a new bull market on June 8. Leadership in the just-completed quarter was decidedly tilted toward growth, with the Nasdaq posting its best first half since 1983 and the Nasdaq 100 (largest stocks), not to be outdone, with its best first half ever. Sector returns showed more of the same with Information Technology, Consumer Discretionary and Communication Services as the only three sectors to outperform the S&P 500. What is perhaps more notable than the outsized returns is the environment in which they occurred: Stocks were dealing with an inverted yield curve, shrinking money supply, declining profits and productivity, tightening lending standards and a Fed in restrictive mode. We often talk of stocks climbing a “wall of worry,” but this backdrop more closely resembles Mount Everest.
