First Half 2023

I would like to recap the first half of 2023 for the US markets. It was a challenging period marked by Federal Reserve rate hikes, banking stress and inflation concerns. However, the markets rebounded strongly from last year’s losses, especially in the technology sector, which benefited from the AI boom. Here are some highlights.

The Nasdaq 100 gained nearly 32% in the first half, nearly breaking its first-half record, set in 1983. The tech sector was propelled by massive enthusiasm for AI that’s gripped Wall Street in 2023. Apple, Microsoft, Amazon, Facebook and Nvidia, one of the leading AI chipmakers, saw their stock price soar in the first half.

The S&P 500 gained nearly 17.6% in the first half while the Dow climbed close to 3.7%. The market leadership remained narrow, with the 10 largest constituents of the S&P 500 driving more than three-quarters of the index’s performance. The energy, financial and industrial sectors were among the best performers, while consumer staples, utilities and health care lagged behind.

The bond market declined slightly as the Fed signaled that it may not be done raising rates. The yield on the two-year Treasury Note ended the quarter at 4.87%, dramatically above year-earlier levels. The ten-year Treasury note started the year at 3.75% and ended the first half at slightly over 4%. The market consensus at quarter-end was that the Fed would resume hiking rates in July, despite “skipping” a rate hike in June.

The outlook for the second half of 2023 is uncertain, as investors weigh the risks of a global recession, a trade war and a debt ceiling crisis against the prospects of a Fed pause, an economy that firms and a low unemployment rate. A lot will depend on how inflation evolves and how the Fed responds to it. Some experts predict a short and shallow recession, while others warn of a hard landing.

In summary, the first half of 2023 was a volatile but rewarding period for US investors, especially those who bet on technology and AI. The second half of 2023 will likely be more challenging, as economic and political headwinds increase.

The opinions expressed herein are those of Riverbend Planning Group. The data and opinions are furnished for informational purposes only and should not be considered a solicitation for an investment decision. Although it is derived from sources believed to be accurate, Riverbend Planning Group makes no guarantee to the accuracy of the information

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