S&P 500 Earnings Update – 2Q.2023
July 23, 2023
How to Make a Qualified Charitable Distribution (QCD) from an IRA
August 14, 2023
Major Asset Classes
July 2023
Performance Comparison
Introduction
July 2023 returns added to gains seen in June, logging the 5th straight month of gains. The S&P 500 index was up +3.1% in July and the NASDAQ 100 index up +3.9%, buoyed by resilient GDP growth and a drop in developed market inflation. In a sign of strong market internals, the small cap S&P 600 Index (+5.5%) and the mid cap S&P 400 Index (+4.2%) both outperformed large cap shares. Meanwhile, US fixed income markets were under pressure with long duration bonds (-2.54%) down significantly on reduced likelihood for recession. In comparison, the iBOXX corporate bond index (+1.66%), and US infrastructure bonds (+3.35%) fared much better. Finally, commodity prices (+10.8%) were notably higher, though lagging inflation indicators were down. Jet fuel (+22.2%) and gasoline (+11.2%) lead the markets, while grain prices like Corn (-9.1%) were down.
The following analysis provides a visual record of July 2023 returns across and within the major asset classes.
US Equities
The S&P 500 index ends July 19.5% year-to-date (YTD), while the NASDAQ 100 index is up an astounding 44.5% since January. In comparison, the S&P 500 Equal Weight Index is up +10.7%. Top performing sectors in July included small cap Energy (+16.7%), small cap Financials (+12.1%) and Megatrend EVs (+11.6%). At the same time, strength in large cap shares was defined by Energy (+7.8%), Communication Services (5.7%) and Financial (4.8%) sectors. Defensive sectors continues to lag the index in July, including Health Care (+1.1%), Real Estate (+1.3%) and Consumer Staples (+2.1%). Red ink was notably absent across the major indices.
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Developed Market Equities
International developed markets (+3.0%) kept pace with US equities in July. For example, notable performers include Norway (+8.4%) and Singapore (+8.4%). Japan (+2.5%) and Europe (+2.4%) which lead performance year-to-date, lagged international benchmarks in July. 2023 performance of note includes Ireland (+32.4%), Italy (+27.4%), and Spain (+22.9%).
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Emerging Market Equities
July 2023 returns for the S&P Emerging Markets Index (6.0%) outperformed the US and the developed markets, helped early in the month by a weak dollar. For instance, strong monthly returns were realized in Turkey (+19.7%), South Africa (+12.1%), and China (+11.3%). In comparison, year-to-date performance for emerging markets (+12.9%) continues to be lead by Poland (+36.4%), Mexico (+32.5%), and Brazil (+24.1%).
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Government Bonds
July returns for the Aggregate US Government Bonds Index (-0.02%) was modest and masked he returns observed across the yield curve. As evidence, short-term yields were down, allowing the US TBills prices (+0.4%) to rise. Meanwhile, long duration yields were up and 20+ years bonds (-2.54%) had strong declines. Returns since January for the Aggregate US Bond index (+2.24%) are yet to match realized inflation in 2023.
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Corporate & Infrastructure Bonds
The iBoxx Corporate Bond Index (+1.66%) outperformed Treasury bonds in July. Performance was lead by Global Multisector REITS (3.35%), US Infrastructure project bonds (+3.35%), and Convertible bonds (+3.03%). In contrast, more defensive plays within the sector, like investment grade and low duration corporate bonds, all had weak returns. Year-to-date performance is topped by Convertible Bonds (+10.55%), US Infrastructure Bonds (+8.78%) and US Residential REITS (+8.39%).
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Commodities
July 2023 returns for the S&P GSCI index (+10.8%) confirmed that most commodities were up, notably oil products. For example, distillates used for jet fuel and heating oil (+22.2%) had the strongest price change of the month, followed by crude oil (+15.8%) and Oats (+15.6%). Grains, which were under drought stress, had sificant price declines follwoing recent rains, as seen in Soybean (-7.2%) and Corn (-9.1%). Year to date are more varied, as shown below.
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Currencies
The US Dollar (-0.9%) continued to exhibit weakness, as first seen in June, allowing many currencies to increase. Since January, the dollar (-1.6%) is down and the strongest currencies are the Mexican Peso (+16.6%), the Brazilian Real (+13.1%) and the British Pound (+6.4%). The wekest currencies since January include the Turkish Lira (-30.5%) and the Yen (-7.9%).
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