weekly market update
Markets finished the first half of 2023 with strength, as inflation continues to moderate and investor sentiment has rebounded because expectations for a sharp recession have receded. As a result, the S&P 500 rose over 6% in June alone and is up roughly 16% year-to-date (per FactSet). This is a very welcome departure from twelve months ago, when investors limped into the July 4th, 2022, holiday weekend with the S&P 500 down roughly -20%, its worst first half since 1970.
However, winners and losers have been unusually bifurcated as four sectors that make up about a third of the S&P 500; utilities, energy, healthcare, and financials, are actually negative on the year while the seven largest companies, or mega caps, that make up almost 28% of the S&P 500; Apple, Microsoft, Amazon, Nvidia, Alphabet (formerly Google), Tesla, and Meta (formerly Facebook), are up on average over 80% year-to-date. As a result, the average S&P 500 stock is up about 7% YTD (per Invesco S&P 500 Equal Weight ETF) and small and mid-cap stocks have been notable underperformers.
Heading into the second half of 2023, the trajectory of inflation will continue to dominate markets. However, while stocks enter July with impressive momentum and we were encouraged to see small and mid-cap stocks finally outperform their large cap peers in June, both rising over 7% on the month (Russell 2000 and S&P Mid Cap 400), stock valuations have become rather full relative to historical averages. Therefore, the second quarter earnings season, that is just a few weeks away, will be particularly important and we will be closely watching for the areas we highlighted as year-to-date laggards to ideally supplant the mega caps stocks that have led most of the market gains in the first half.
Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder
From everyone on our Team, we hope you have a wonderful
Fourth of July holiday weekend!
Our office will close at 12pm on Monday, July 3 and remain closed
for the July 4th holiday.