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Q1 2023

Key Takeaways, First Quarter 2023

By Ralph Goldsticker, CFA | Apr 2023

Despite turmoil in the banking sector, the prior quarter’s rebound continued. US stocks gained 7% and bonds 3%. The quarter’s most significant event was the failure of Silicon Valley Bank (SVB) in March. However, after markets reacted negatively to the initial shock, the strong regulatory response and the lack of broad contagion allowed investors to regain confidence, and markets recovered. 

The Fed continues to signal and demonstrate that bringing inflation down is its top priority. It increased the Fed Funds rate twice during the quarter. The second one was shortly after the failure of SVB. The middle of the Fed Funds target range is 4.875%, up from essentially 0% at the start of 2022. Despite recent high inflation, both market and survey-based indicators suggest that it is coming under control. 

While many market strategists and economists are forecasting a recession, most indicators suggest that if there is one, it is unlikely to be severe. Option-implied measures of volatility remain elevated.



While there were large swings along the way, stock markets rose. The broad US market gained 7.2%. Developed international stocks rose 8.5%, and emerging markets 4%. 

  • Despite being up over the last two quarters, stocks are down since the end of 2021. The broad US market is down 13.4% and international stocks 10.2%.

  • Because they benefit from improving economic sentiment, US growth stocks outperformed, rising 14% versus 1% for value. 

  • Tech gained 23% and Consumer Services 20%. Energy lagged, losing 5%. Utilities and Financials, the most interest rate sensitive sectors, lost 3%.

Fixed Income


The yield of 3-month T-Bills rose 43 bps. After climbing to 4% at the end of February, the yield of the 10-year Treasury fell to 3.48% in response to the banking crisis. Investment Grade (IG) credit spreads widened, and High Yield (HY) spreads narrowed. 

  • 3-month T-bills are yielding 4.85%, up 43 bps since the start of the year, and 4.79% since the end of 2021.

  • 10-Year Treasuries are yielding 3.48%. The yield was down 40 bps since Q4, but up 1.96% since the end of 2021.

  • IG bond spreads widened by 8 bps during the quarter. HY narrowed by 14. IG spreads are is 42 bps wider than at the end of 2021, and HY 1.72%.

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