2023 Midyear Market Update
By Jeff Gilbert
Oof. 2023 isn’t shaping up to be much friendlier than 2022. However, there is some good news: the first half of the year has shown some signs of progress.
Let’s take a deeper dive into those areas, as well as what you can do to prepare for the second half of the year and beyond.
The Markets Are Up
So far in 2023, the performance of the financial markets has been measured, yet positive. While the Dow Jones remains effectively flat, mirroring its position from this time last year, the S&P 500 has seen a modest rise, up 8.6% for the year to date. The Vanguard Total Stock Market Index Fund, providing a broad snapshot of the entire U.S. market, aligns closely with the S&P 500, reflecting an 8.2% increase. The tech-centric NASDAQ has shone brighter, growing a noteworthy 23% this year.
However, adopting a longer-term perspective paints a slightly different picture. Over the course of the past year, all these indices are essentially unchanged from their positions this time in 2022, suggesting a degree of stability in the midst of fluctuating market conditions.
Underlying these market movements, the U.S. GDP maintains positive, yet isn’t high enough to be called robust. Meanwhile, the Federal Reserve continues its trend of gradually raising interest rates. Despite this seemingly stable backdrop, it remains uncertain how these various forces will influence the stock market’s performance in the second half of 2023.
Employment Is Strong
The U.S. employment scene shows steady progress with an unemployment rate of 3.4%. Despite this promising figure, representing 5.7 million active job seekers, there are complexities beneath the surface. While unexpected job losses and short-term unemployment have decreased, the numbers of long-term unemployed and part-time workers desiring full-time roles remain a concern. Also notable is the rise in people outside the labor force but eager to work, up to 5.3 million.
GDP Is Growing
The U.S. economy has shown signs of rebound in Q1 2023 with an annualized GDP growth of 1.3%, slightly exceeding the initial estimates and market predictions of 1.1%. Consumer spending growth outperformed expectations, rising to 3.8% despite ongoing high inflation.
This growth, while not overly impressive, still stands in contrast to 2022, which saw two negative GDP quarters. It is also expected to continue, with forecasts predicting a growth rate of 1.5% by the end of the second quarter.
The Federal Reserve, Interest Rates, and Inflation
The Federal Reserve has raised its key interest rate to the highest level in 16 years to combat high inflation. However, this streak of 10 hikes could be nearing its end as the Fed assesses their impact on economic growth and inflation. Despite these increases, inflation remains above the Fed’s 2% target, currently sitting at 5%, far lower than its peak of 9.1% in 2022. Finally, the rising costs of goods and services, as well as tighter lending requirements and higher interest rates, could hamper the economy in the second half of 2023 as well as 2024.
The World Is Experiencing the Same Issues As the U.S.
Global growth is projected to decline from 3.4% in 2022 to 2.8% in 2023, the lowest medium-term forecast in decades, largely due to the tight policies needed to curb inflation, deteriorating financial conditions, and geopolitical tensions. Inflation is expected to decline from 8.7% to 7% between 2022 and 2023, but the return to ideal inflation rates is not expected before 2025. Despite the cautious outlook, the MSCI All Country World Index is up over 7.5% so far this year.
Focus On What You Can Control
Understanding these economic data and projections can be a crucial part of preparing for the rest of 2023, but it’s only part of the story. To make the most of these insights, you must integrate them into a comprehensive financial plan that addresses your personal goals. For instance, how much do you need to save to meet your retirement goals? How much can you safely distribute from your accounts each year? Are your investments structured optimally for your financial situation? No matter what the economy, the Federal Reserve, Congress, or inflation does for the rest of the year, these are factors within your control.
At Balboa Wealth Partners, your needs come first no matter what’s happening with the economy. We specialize in overseeing your financial affairs, coordinating the day-to-day execution of your long-term financial plans, and keeping you from falling victim to common retirement pitfalls. To learn more, give me a call at 949-445-1465 or email me at [email protected].
About Jeff
Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Orange County, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email [email protected].
Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.
Securities offered through Kingswood Capital Partners, LLC, member FINRA, SIPC.
Balboa offers advisory services independent of Kingswood. Neither firm is affiliated.
