This time of the year I like to look through some of my performance spreadsheets to see how things are going in various investment areas. What a difference a year makes, here are some of my observations (all YTD Return numbers below are as of August 2, 2023).
S&P 500 started the year well and had a 7.3% into the end of January. It then rolled over and had a rough few weeks bottoming on March 13th in the midst of regional bank crisis precipitated by the failure of Silicon Valley Bank. After FDIC stepped in and the nerves settled down, the index had had an unbroken 20% run lasting 4.5 months. In that time the largest pullback was 2.5%! Federal Reserve has hiked the rates four times so far this year, while skipping one in their June meeting. The market expects maybe another raise and then a “wait and see” pause. The chorus of “soft landing” or “no recession” has grown louder as the economy is holding up despite rising rates and the market has responded enthusiastically.
• There is a strong reversal pattern from 2022 – whatever was down the most last year is doing the best this year
• Bitcoin (and other crypto assets) is having a nice bounce after huge drop in the wake of major scandals in 2022 (FTX being the largest)
• Growth stocks are having a huge year
• U.S. stocks are once again doing better than their foreign counterparts
• Gold is still not doing well enough to justify its inflation-hedging reputation
• Bonds are doing just ok given the magnitude of 2022 decline
• Oil and US Dollar are up the 2% range
I also wanted to quickly mention style-boxes. The chart below shows that Large Growth is doing the best while Small Value is the worst. Other boxes line up very neatly in between.
Sectors & Industries
• On the sector level, semiconductors are having a great year with the growing economy and AI hype
• Homebuilders aren’t far behind as new construction is the only game in town with dearth of existing homes for sale
• Communication and Tech are reversing last year’s declines with some gusto
• Consumer stocks and Transports are doing well with the surprisingly strong economy
• On the bottom we have Regional Bank (driven by above-mentioned crisis in March)
• Defensive stocks (Utilities, Health, Staples) are not keeping up as recession concerns fade away
• Energy is also languishing as it absorbs huge 2022 gains and oil prices remain stuck in an $80 range.
• Of the major countries Mexico, Italy and Brazil are leading the pack just about the Stars and Stripes
• Other EU countries are doing well also as the market comes around the idea that cutting off Russia won’t completely wreck the continent
• China, India and most of the other emerging markets are still struggling to get going after COVID
• Bond market can’t quite get off the floor as the Fed is continuing to raise interest rates
• Overall bond market (AGG) is roughly flat, after being up 4.5% in April/May
• Some of the riskier categories are doing better along with the stock rally
• Treasury bonds in general and particularly long-terms ones are still struggling