To judge from the final numbers for stock and bond market performance for the first quarter, it wasn’t such a bad outcome: Both markets closed the first three months of 2023 with single-digit gains.
But the path higher wasn’t smooth and the outlook from here remains uncertain as investors wrestled first with stubbornly high inflation and then with the unknowns of the crisis among regional banks.
As the second quarter gets underway, what’s the outlook for the stock and bond markets? What should investors do from here?
We’ve gathered insights and perspective from analysts and specialists about market performance, individual stocks, funds, and strategies.
2022′s Market Performance and the Economy
The markets in the first quarter of 2023 were tossed back and forth, first by data showing inflation stuck at uncomfortably high levels and a red-hot job market, which led to expectations of still more Federal Reserve rate hikes. That story got turned on its head with the collapse of Silicon Valley Bank and concerns about a credit crunch as the first quarter head into its final days.
Here is both our look at the big market and economic trends from the first quarter of 2023 and Morningstar’s market outlook for the second quarter and beyond:
14 Charts on the Q1 2023 Whiplash Market Performance
Big swings in expectations around Fed policy dominated stock and bond market returns.
A Positive Q1 2023 for Stocks and Bond Markets, but the Coast Isn’t Clear
The key variable for investors to weigh will be the impact of the banking crisis on the economy.
Investors Look Past Turmoil and Drive Stocks Higher in Q1 2023
Even as the Fed looks to pause rate hikes, reasons for caution abound.
Q2 Stock Market Outlook: Undervalued, but a Rough Road Ahead
Monetary tightening is either at, or close to, an end, but market will be looking for increase in leading economic indicators to begin viable rally.
Q1 2023 Stock Performance and Sector Outlooks
Which stocks have been the best performers to start the year? Which have taken the biggest beating? Which sectors and stocks should long-term investors be looking to buy now?
Here, we take a deeper dive into the first quarter′s stock market performance among sectors and individual stocks, along with the second-quarter outlook from Morningstar’s stock analysts:
Best-Performing Stocks of Q1 2023
Beaten-down tech stocks Nvidia, Meta Platforms, and Salesforce returned with vigor during the first quarter of 2023.
Worst-Performing Stocks of Q1 2023
Regional banks and REITs get pummeled; Bed Bath & Beyond and Groupon also take a hit.
Financial Sector Stock Outlook: Berkshire the Usual Stalwart
Blackstone, Citigroup also stand out within a more cautious banking landscape.
Real Estate Stock Outlook: AvalonBay Notable in This Undervalued Sector
Park Hotels and Ventas are also recovering well from pandemic’s effects on occupancy levels.
Q1 Mutual Fund Performance
For mutual fund investors, the positive returns in the stock and bond markets during the first quarter offered some relief after the sea of red that was 2022′s performance. However, performance was uneven.
In the stock market, the rebound of battered tech stocks gave a lift to funds with stronger growth-stock tilts, while value funds and dividend strategies lagged.
Among bond funds, funds with heavier weightings of more interest-rate-sensitive bonds led returns as bond yields fell sharply. However, the catalyst for the drop in bond yields was the regional bank crisis, which spurred fears of a credit crunch that could hurt lower-quality bond issuers.
Stock Funds Off to Hot Start in 2023
A growth-led rally made up for some lost ground after 2022′s shellacking.
An Up and Down First Quarter Across All Morningstar Fixed-Income Categories
By the end, investors sought refuge in high-quality assets amid heightened market uncertainty.
For Bond-Fund Investors, Credit Risk Suddenly Matters
The banking crisis has pushed the quality of funds’ bond holdings into the spotlight.
