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Q2 2023

Key Takeaways, Second Quarter 2023

By Ralph Goldsticker, CFA | Jul 2023


The quarter began with lingering concerns about the banking crisis, but government intervention alleviated the stresses and the economic expansion continued. With the banking sector seemingly under control and favorable economic news on the employment and inflation fronts, US and international stocks gained. Investment grade bonds lost as interest rates rose. 

After increasing rates in February, March and May, the Fed paused in June. However, it continued to signal that bringing inflation down is its top priority. While the Fed said that future increases will be data-dependent, investors are expecting two more increases by the end of the year. Despite recent high inflation, both market and survey-based indicators suggest that inflation is coming under control. 

While many market strategists and economists are continuing to forecast a recession, most indicators suggest that if there is one, it is unlikely to be severe. Stock market volatility, both observed and option-implied, is low.



Global equities rallied. With the backdrop of a resilient economy and fervor over AI, the broad US market gained 8.4% led by a handful of mega-cap names. Without the support of US tech and related growth stocks, developed international stocks gained only 3.0%, and emerging markets 0.9%. 

  • Despite being up over the last two quarters, stocks are down since the end of 2021. The broad US market is down 6% and international stocks 8%.

  • Benefitting from improving economic sentiment and expanding P/E ratios, US growth stocks outperformed, rising 13% versus 4% for value. 

  • Tech gained 17%, Consumer Discretionary 13% and Consumer Services 12%. Utilities lagged, losing 3%.

Fixed Income


With the hawkish Fed policy, Treasury interest rates rose. Relatively good economic news resulted in shrinking credit spreads. 

  • 3-month T-bills finished the quarter yielding 5.43%, up 58 bps  during the quarter, and 5.37% since the end of 2021.

  • 10-Year Treasuries are yielding 3.81%. The yield rose 33 bps during the quarter, 2.29% since the end of 2021.

  • Investment Grade corporate bond spreads narrowed by 15 bps. High Yield narrowed by 65. IG spreads are 50 bps narrower than at the end of February 2020, and HY 2.47%.

  • The real (after inflation) yield of 10-year TIPS rose to 1.59%. It is above its pre-pandemic level, and up from its low of -1.16% at the end of July 2021.

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