The beginning of 2023 has seen a sharp reversal in leadership in the stock market. All through 2022, growth stock prices declined while value stocks fared significantly better. From the start of the year, the market has been pushed higher by beaten down growth stocks, while at the same time dividend paying stocks and value-oriented stocks have lagged considerably.

The downward trend of stocks continued during the 3rd quarter despite a sizeable mid-summer rally that eventually succumbed to the downward pressures on the market. On June 16th, with a year-to-date decline of approximately 24%, we increased stock allocations as the S&P 500 dipped below 3700. Almost immediately, stocks began to stabilize and move higher. The market wound up increasing 18% over the next two months before once again resuming declines on August 17th.

The experience of going through a bear market is difficult and stirs up significant fear emotions.  However, as we detail in this Bulletin, a lot of the damage to stocks has likely already occurred.  While it is certainly possible that the market could decline further, it is our opinion that the time to be significantly more defensive has passed. 

U.S. stocks suffered a decline of almost 5% during the month of September. The pressure on stocks increased as investors became more concerned about waning support by the Federal Reserve, higher interest rates and high stock valuations.

The first three months of 2021 saw continued growth in U.S. equities at a remarkable pace. The Wilshire 5000 index which represents all U.S. stocks increased 6.41%. Continued expansion at that pace would annualize to a gain of more than 25%!

The stock and bond markets in 2020 were crazy just like everything else about 2020! The journey to a significantly positive year for the Wilshire 5000 Total Stock Market was nothing short of remarkable. The wild ride occurred primarily in three extreme phases.

The U.S. stock market achieved significant gains for the 2nd straight quarter following the pandemic induced selloff of February and March 2020. Fixed income also advanced with the overall bond market returning a little less than 1% with municipals and corporates faring better than government bonds.

Almost as quickly as the market deteriorated during February and March of this year, we have experienced a remarkable resurgence during the second quarter. During the past few months, the S&P 500 has erased most of its losses from earlier this year. On the heels of unprecedented Federal Reserve stimulus, the markets are pricing in a return to prosperity….. or at least for technology.

The U.S. stock market produced modest growth during the 3rd quarter of 2019, while U.S. bonds powered ahead with a return that was double the stock market return.

As the stock market continues to reach and exceed all-time record highs, we are maintaining a cautiously optimistic asset allocation for investment portfolios.

After years of consistent returns, volatility has returned to the market in 2018.