Financial Market Commentary

Monthly Market Commentary

February 2023 Edition

These monthly market commentaries share a synopsis of the U.S. financial markets with intelligent insights.

Latest Commentary:

February 8th, 2023

January Shock!

2023 came in hot as investors were quite willing to put the bad memories of 2022 behind them and start looking forward.  Interestingly what they turned to in many cases were the stocks that hurt them the most in the prior year. 

In January Tesla was up 39%, Nvidia was up 37%, Meta (Facebook) was up 24%, and Amazon was up 21%.  Trying to predict how a year will play out based on January's performance is challenging.  While a positive January can often signal a favorable stock market for the coming year, there have been many years in which that has not been the case. 

Bond markets also have come out of the gate with positive returns as interest rates declined through the month as inflation rates and other data supported views that the Fed may start to ease off its aggressive tightening cycle in the first half of 2023. 

An interesting observation to note is the change in the trailing one-year performance of the S&P 500 due to adding the positive return (6.3%) in January 2023 and the dropping negative return (-5.2%) in January 2022.  The trailing one-year return as of 12.31.22 was -18% and is now -8.2% as of 1.31.23.  Understanding what is embedded in trailing returns is important when putting results in context. 

Here are a few high-level comments on what occurred across the public investment markets during the month:


  • The S&P 500 was up 6.3% in the month – a nice start to the year after a dismal 2022. 
  • Bond markets were also up in January with the Bloomberg Aggregate Index up 3.1%.     

Domestic Equity

  • Equity index returns were solidly positive across all segments in January.  Expectations for a less aggressive Fed due to declining inflation levels boosted investor sentiment, particularly in stocks and sectors that lagged in 2022. 
  • Large-cap growth stocks outperformed large-cap value due to a rally in beaten-down technology and consumer stocks.  There was less divergence by style in small and mid-caps which outperformed large-cap stocks in the month.

International and Global Equities

  • Foreign stocks continued their rally from late 2022 and outperformed US stocks during the month. Multiple markets across Europe had a strong performance as economic conditions showed improvement. 
  • Emerging market equity returns were in line with developed markets during January.  China's abrupt reversal of its Covid policies provided more support to its equity markets which are up 52% over the last three months. 

Fixed Income Markets

  • The US bond market delivered positive returns during the month as interest rates declined 20-40 basis points along the yield curve.  Credit markets realized positive returns across the quality spectrum.

Specialty Markets

  • The REIT segment benefited from the overall rise in equities and the decline in interest rates.  Commodities declined with oil down modestly while natural gas fell throughout the month. 

US Equity Sectors

  • Sector performance in the month was mixed as many of 2022's laggards delivered strong returns while defensive sectors such as Consumer Staples, Health Care and Utilities lagged behind. 

Whether you’re one to set ambitious New Year’s resolutions or simply use the beginning of the year to reset a few habits, there’s almost always some value in reflecting on the past year before looking ahead. The same is true for the markets. When we look back on 2022, it’s easy to identify the challenges—but if we look closer, we can also uncover some opportunities.

First, we need to remember what we learned in 2022. The Federal Reserve (Fed) showed us they can and will take swift action to squelch inflation, as demonstrated by the sharp interest rate increases we saw last year. We also saw that severe inflation coupled with the Fed’s interest rate hikes had a larger-than-expected impact on the stock market. We also can’t forget the impact on bonds, with increased Treasury yields and ultimately, the worst year on record for core bonds (as measured by the Bloomberg Aggregate Bond Index).

So, what does all of this mean for 2023—and where are these opportunities? In the bond market, it looks like we’ve uncovered some value, especially for those income-oriented investors. This is a welcome change after nearly 20 years of difficulty in finding stable income-producing investments as market interest rates continued to fall. With higher yields now available in some durable areas of the bond market, we believe investors may be able to enhance their income-generating portfolios, while potentially taking on less risk than in years past.

Turning to stocks, the early weeks of 2023 are looking more promising. Inflation is still high but falling, the Fed is expected to end rate hikes by the spring, and there are renewed hopes for a softer landing for the U.S. economy; our expectation is that the economy will either narrowly avoid a recession or enter a mild, short-lived recession in early-to-mid 2023. These factors have allowed investors to begin charting a more positive path forward, which we believe will continue despite some potential choppiness in the market. We continue to favor U.S. equities over international markets despite some pressure we may see on domestic profit margins this year. The international markets have also begun to show some signs of life as inflation looks to be peaking in the U.K. and Europe as well. Emerging markets have even bounced back slightly, although uncertainty over China’s economy remains a wildcard.

Overall, we see the reason for renewed optimism when it comes to the markets in 2023. Should the Fed pause rate hikes in the near term as expected, we may see a nice stock market rebound supported by falling inflation, reasonable valuations, and stable interest rates. Further equity market volatility remains a risk, but we believe we’ll see more positive outcomes from the stock and bond markets this year.

If you have any questions or want a review of your portfolio or retirement plan, we encourage you to contact us.


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Scott Krase
Wealth Manager
Connor & Gallagher OneSource (CGO)

Securities offered through LPL Financial, Member FINRA & SIPC.  Investment advisory services offered through Global Retirement Partners, LLC DBA Connor & Gallagher OneSource, an SEC registered investment advisor.  Connor & Gallagher OneSource and Connor & Gallagher Benefit Services are separate entities from LPL Financial.

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of August 3, 2022.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. Connor & Gallagher OneSource doesn’t provide research on individual equities. All information is believed to be from reliable sources; however Connor & Gallagher OneSource makes no representation as to its completeness or accuracy.

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