Bridge Perspective – July 2023

Mid-Year Review: Staying Focused as Markets Shift

The first half of the year has given investors plenty to process; from banking turmoil to an increasingly inverted yield curve, to the debt ceiling debate. Inflation has continued to retreat from last year’s four-decade high, with a 12-month rise in US consumer prices falling to 4% in May. The reading a year earlier was more than double that. Fed officials paused on raising the benchmark federal funds rate in June after more than a year of increases, but signaled they were leaning toward resuming rate increases if inflation doesn’t cool further. In Washington, politicians debated the US debt ceiling. After much back-and-forth, the president and Congress agreed on a deal to raise the debt limit in June, avoiding the impending possibility of a US default. Amid the discussions, stock and bond markets seemed to take the news in stride. The current deal imposes restraints on government spending for two years.

Equity and Fixed Income Markets

In 2022 the global equity markets as measured by the MSCI All Country World IMI index and the S&P 500 index were down slightly more than 18%. International Developed markets were down 15% and International Emerging Markets were down almost 20%.  Large growth stocks were down around 24% vs. large value stocks were down around 7%. As of June 30, 2023 we have seen a reversal, with the global equity markets up 13.25%, the S&P 500 index up 16.89%, International Developed markets up 11.29% and International Emerging Markets up 4.89% for the year. A sharp reversal has occurred in large growth stocks up 29.2% in 2023 largely driven by seven very large (Mega cap) growth stocks with AI (artificial intelligence) links such as Nvidia, Meta (Facebook), Apple, Microsoft, Alphabet (Google), Amazon and Tesla.

As with the equity markets, the Bloomberg U.S. Aggregate Bond Index was down 13% in 2022, and the Bloomberg Global Aggregate Bond Index was down 16%. In 2023, the U.S. Aggregate Bond Index is up 2.09% and the Bloomberg Global Aggregate Bond Index is up 1.43%.  The yield curve remains inverted with short term yields higher than long term yields. Short term U.S. Treasuries are still attractive at yields at over 5%. The real estate sector, which experienced a sharp selloff in both the S&P Dow Jones US Real Estate index and Global Real Estate index in 2022 is up 5.77% in the US and up 2.09% globally.  The real estate sector has many components including warehouses, hotels, apartments, data centers, retail, and offices. The office sector is experiencing structural change (potentially permanent vacancies due to the number of employees working from home) relative to the other real estate sectors. While commodities were the best performing sector in 2022, the Bloomberg Commodity Total Return index is down YTD 7.79% as of June 30, 2023 and Gold is up 5.23%.

A Few Thoughts for 2023

The news headlines and volatility we experienced in the first half of 2023 remind us that uncertainty in the markets is the nature of markets.  The best method to protect ourselves is to have a financial plan, a diversified portfolio and not to try to time the markets.  The uncertainties and risks we faced in the first half of 2023 will continue and eventually evolve into new risks and uncertainties.

The U.S. dollar is a special focus for us heading into the back half of the year, as it was a strong performer in 2022 when interest rates were rapidly rising but may decline in 2023 similar to other strong performers in 2022 such as energy and commodities. A declining dollar usually helps international markets outperform U.S. markets.

We will continue to monitor the markets and make prudent changes when we have sufficient data to support our decision.


  • Article adapted Dimensional Fund Advisors Quarterly Market Review Second Quarter 2023 and Avantis Monthly ERF Field Guide, June Edition.
  • Index returns provided by Avantis Monthly ETF Field Guide, June Edition
  • Figure 1 Data as of 6/30/2022 and 6/30/2023. Source: Bloomberg, Federal Reserve Board of Governers (FRED), U.S. Bureau of Labor Statistics, Bureau of Economic Analysis, and Federal Reserve Bank of Atlanta GDPNow. 1 Estimate from Federal Reserve Bank of Atlanta GDPNow
  • Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
  • The MSCI World ex USA Index represents large, mid-size and small companies across developed (Europe, Japan) and emerging (Asia, Latin America, Middle East).
  • The S&P 500 index represents five hundred of the largest U.S. companies.

Bridge Advisory LLC Disclosures

Bridge Advisory, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Investment Advisory Services offered through Bridge Advisory, LLC. Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type. Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Information herein has been obtained from sources believed to be reliable, but Bridge Advisory, LLC. does not warrant its completeness or accuracy; opinions and estimates constitute our judgment as of this date and are subject to change without notice. This newsletter expresses the views of the authors as of the date indicated and such views are subject to change without notice.

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