| Index | First Quarter 2023 | Year To-Date 2023 |
| S&P 500 | 7.0% | 7.0% |
| Dow Jones Industrial Average | 0.4% | 0.4% |
| Russell 2000 | 2.3% | 2.3% |
| MSCI All Country World Index ETF | 7.2% | 7.2% |
| Barclays Aggregate Bond | 3.3% | 3.3% |
Performance Source: Koyfin
U.S. Versus International
The S&P 500, an index of large U.S. companies, posted a total return of 7.0% for the First Quarter of 2023. U.S. stocks were roughly in line with international for the quarter as measured by the iShares MSCI ACWI ex-US ETF, a representation of international stocks outside the U.S. The International ETF return for the First Quarter of 2023 was 7.2%.
The U.S. Dollar weakened slightly throughout the quarter as indicators continued to show that the pace of interest rate increases by the U.S. Federal Open Market Committee may slow. On the flip side, the European Central Bank is looking at further tightening and balance of rising rates while being cognizant of growth. When the dollar declines, assets priced in foreign currencies, such as international stocks, rise in value.
U.S. stocks outpaced international stocks significantly from 2008 through 2021. The tide may be turning. A combination of U.S. dollar weakness, more attractive international stock valuations and stable economic growth may benefit international stocks over U.S. for the next several years.
U.S. Sectors
Top performing U.S. S&P 500 sectors as reported by Koyfin for the First Quarter of 2023 include Technology (21.6%), Communications (21.1%) and Consumer Discretionary (16.1%). Laggards for the First Quarter include Financials (-5.5%), Energy (-4.3%) and Health Care (-4.3%).
A strong shift in sector leadership was driven by the banking issues at Silicon Valley Bank and a couple of other banks with company-specific issues. More growth-oriented cyclical stocks took the lead in the first quarter as the prospect of ongoing large interest rate increases diminished.
Financial stocks performed relatively poorly due to the banking sector news. Energy followed suit as an economic slowdown and diminishing inflation may slow their growth momentum. We are seeing higher numbers of companies laying off workers. However, this can be good for the stock market as it means companies are being prudent and becoming more efficient when it may be needed most. Major recessions are typically driven by a surprise slowdown that catches companies with significant excess that they need to cut quickly.