Summary of Market Performance
First Quarter Ended March 31, 2023

Summary of Market Performance Q1 2023


Volatility continued to challenge equity markets in the first quarter in response to elevated inflation, an uncertain outlook for monetary policy, and, in March, the stunning failure of Silicon Valley Bank. The NASDAQ led major averages higher in Q1 with its gain of 17.1% as mega-cap growth stocks outperformed in response to a friendlier interest-rate outlook. The Dow Jones Industrial Average posted a meager 0.9% return, while the S&P 500 returned 7.5%. The S&P 500’s information technology and communication services were the top performing with impressive gains of 21.7% and 21.3%, respectively, led by the largest capitalization issues: Apple, Microsoft, and Google.

The S&P 500’s financial sector experienced the steepest drop at -5.6%, impacted by the regional banking crisis in March, when Silicon Valley Bank and Signature Bank collapsed and were taken over by the FDIC. These failures put pressure on other regional banks and smaller, less mature companies, which rely heavily on credit for ongoing liquidity needs. The potential of tighter credit conditions caused smaller capitalization issues to underperform with the S&P SmallCap 600 turning in a lackluster 2.6% return. Energy, healthcare, and utilities, the sectors typically categorized as defensive value, had negative Q1 returns of -4.4%, -4.3%, and -3.2%, respectively. For energy, it was a surprising reversal after being the top performing sector of 2022.


Foreign markets outperformed the S&P 500 in the first quarter as the MSCI EAFE Index rose 8.5%. Europe outpaced other regions, producing a 10.7% return despite the downfall and sale of Credit Suisse to rival UBS. Central banks in Europe and the U.K. raised rates 100 bps and 75 bps, respectively, as inflation levels remain elevated. The MSCI Emerging Markets Index lagged with a 4.0% return. China cooled from a strong fourth quarter as US-China tensions resurfaced following the shooting down of a Chinese high-altitude balloon in US airspace. Early in the quarter, optimism about the re-opening of the economy and an apparent easing of regulatory pressure on the internet sector were positive contributors. For developed countries Ex-U.S, information technology was the top sector, mirroring that of U.S. markets, while real estate fared most unfavorably posting a -1.9% return. The dollar index stayed relatively flat during the first quarter and remained under its 20-year high seen last September.


The Bloomberg U.S. Aggregate Bond Index advanced 3.0% in the first three months of the year as U.S. Treasury yields ended the quarter sharply lower, largely due to banking industry troubles in early March, which sparked a flight to quality. In response to lower interest rates, long-dated Treasury and corporate bonds rose 6.2% and 5.4%, respectively. The U.S. 10-year Treasury yield fell from 3.92% to 3.47% while the two-year dropped from 4.82% to 4.03%. The collapse of Silicon Valley Bank in mid-March overshadowed concerns over re-accelerating inflation and prompted the sharp bond rally in anticipation of future interest rate cuts. Emerging Market debt moved higher off 2022 lows to produce an impressive 5.4% first quarter gain. Annual inflation moderated in the quarter, with headline CPI dropping from 6.4% in January to 6.0% in February. The Federal Reserve announced two rate hikes of 25bps each, in the last two meetings, marking a slowdown in pace.


The S&P GSCI Index dropped 4.9% in the first quarter. Energy was the worst-performing component of the index, while precious metals performed best as the recent US dollar weakness and banking crisis attracted investors looking for safe haven. Gold surged 8.1% while silver achieved a more modest 0.8% return. Within energy, prices for natural gas, gas oil, and heating oil were all sharply lower thanks to a milder than expected winter weather, which kept a lid on demand.

Nick Darzentas Bio Pic

Nick Darzentas

Nick Darzentas joined the firm in December 2021 as the Portfolio Manager. He is experienced in equity research and analysis, portfolio construction, and evaluating private equity offerings. In addition, he has implemented and managed equity models as well as long/short portfolios and options strategies.

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