Defined Benefit
Defined Contribution
Insurance Assets
Nonprofit

Stocks Near a Record High, and Bonds Reverse Course

Stocks Near a Record High, and Bonds Reverse Course
clock
3 min 4 sec
Highlights from the Global Markets in 4Q23

U.S. Equity: The S&P 500 Index approached a record high as the year closed. Of note, 2023 was the first year since 2012 that the S&P failed to reach a high-water mark. That said, the index was up an impressive 11.7% in 4Q and 26.3% for the year. The tech sector was the clear winner for the quarter and the year (+17.2%; +57.8%) while Energy (-6.9%; -1.3%) was the only sector to register both a 4Q and 2023 decline.

Small caps (R2000: +14.0%; R1000: +12.0%) outperformed large caps for the quarter but lagged for the year (R2000: +16.9%; R1000: +26.5%). Growth outperformed value in 4Q (R1000 Growth: +14.2%; R1000 Value: +9.5%) and even more substantially for the year (R1000 Growth: +42.7%; R1000 Value: +11.5%).

global markets in 4q23

Index concentration continued to have a notable impact on returns in 4Q. The “Magnificent Seven,” which comprise over 25% of the S&P 500, accounted for 76% of the 2023 return for the index. Fourth quarter and 2023 returns for the bunch were impressive: Alphabet: +6.8%, +58.8%; Amazon: +19.5%, +80.9%; Apple: +12.6%, +49.0%; Meta: +17.9%; +194.1%; Microsoft: +19.3%, +58.2%; NVIDIA: +13.9%, +239.0%; Tesla: -0.7%, +101.7%. The index would have been up only about 10% for the year without these stocks, and the equal-weighted S&P 500 returned 11.9% in 4Q and 13.9% in 2023.

Global Equity: Global ex-U.S. equities (MSCI ACWI ex USA: +9.8%) performed well in 4Q and for the year (+15.6%) but lagged the U.S. Weakness in the U.S. dollar helped 4Q returns across developed markets (MSCI EAFE: +10.4%; MSCI EAFE Local: +5.0%). As in the U.S., growth outperformed value in the quarter (MSCI ACWI ex USA Growth: +11.1%; MSCI ACWI ex USA Value: +8.4%). However, value outperformed growth for the full year (MSCI ACWI ex USA Growth: +14.0%; MSCI ACWI ex USA Value: +17.3%).

Mirroring the U.S., Technology was the strongest sector for both the quarter and the year (MSCI ACWI ex USA Information Technology: +20.0%; +36.3%).

Emerging markets (MSCI Emerging Markets: +7.9%) also did well but underperformed developed ex-U.S. Emerging Asia was the weakest region (+6.7%; +7.8%) for both periods, hurt by China. China was a notable laggard (-4.2%; -11.2%). Latin America (+17.6%; +32.7%) was the best-performing region for the quarter and the year with Mexico (+18.6%; +40.9%) and Brazil (+17.8%; +32.7%) up strongly.

global markets in 4q23

U.S. Fixed Income: The 10-year U.S. Treasury yield was volatile in 2023—ranging from an April low of 3.31% post the regional banking “crisis” to the October high of 4.99% and subsequently declining into year-end for a 3.88% close. Falling rates drove returns for the Bloomberg US Aggregate to +6.8% in 4Q and +5.5% in 2023, a sharp contrast to the -1.2% YTD print as of 9/30. Corporate credit strongly outperformed U.S. Treasuries in 4Q (excess returns of 203 bps) and for the year (455 bps). High yield (Bloomberg US High Yield) climbed 7.2% for the quarter and was up an equity-like 13.4% for the year.

The yield curve remained inverted, but to a much lesser extent; 35 bps between the 2-year and 10-year U.S. Treasury yields versus more than 100 bps earlier in the year. The Bloomberg Municipal Bond Index soared 7.9% in 4Q, reversing its YTD 1.4% decline as of 9/30; the index was up 6.4% for the year.

Global Fixed Income: The Bloomberg Global Aggregate ex USD Index rose 9.2% (hedged: +5.4%) in 4Q as rates fell and the U.S. dollar weakened. Full-year results (+8.3% hedged; +5.7% unhedged) were also positive but reflected an overall stronger greenback. Emerging market debt indices also posted solid returns. The hard currency JPM EMBI Global Diversified gained 9.2% in 4Q and 11.1% in 2023. The local currency-denominated JPM GBI-EM Global Diversified returned 8.1% in 4Q and 12.7% for the year.

Real Assets: Real assets generally performed well in 4Q with the notable exception being energy. Reflecting sharp declines in natural gas and oil, the S&P GSCI sank 10.7% for the quarter. Metals were up, with gold hitting a new high (S&P Gold Spot Price: +11.0%). Materials (S&P 100 Materials: +13.1%), REITs ((MSCI: US REIT: +16%), and infrastructure (DJB Global Infrastructure: +12.1%) all posted double-digit returns. TIPS underperformed nominal U.S. Treasuries but were up 4.7% for the quarter (Bloomberg US TIPS Index).

 

Disclosures

The Callan Institute (the “Institute”) is, and will be, the sole owner and copyright holder of all material prepared or developed by the Institute. No party has the right to reproduce, revise, resell, disseminate externally, disseminate to any affiliate firms, or post on internal websites any part of any material prepared or developed by the Institute, without the Institute’s permission. Institute clients only have the right to utilize such material internally in their business.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Public Markets

The Supermicro Conundrum: When Successful Small Cap Stocks Hurt Managers

Nicole Wubbena
Callan expert analyzes the impact of Supermicro on small cap growth managers.
Public Markets

Gains for Stocks Mask Wide Disparities; Little to No Change for Bonds

Kristin Bradbury
Callan expert analyzes the global stock and bond markets in 2Q24.
Operations

A Deeper Look at How We Did With Our Capital Markets Assumptions

Julia Moriarty
An analysis of how Callan's Capital Markets Assumptions performed over time by asset class.
Public Markets

Is This a Time for Active Managers to Shine?

Tony Lissuzzo
A post from a member of the Callan Nonprofit Group on how dispersion affects active management.
Private Markets

Private, Public Real Estate Indices Fall on Rate Concerns

Aaron Quach
Callan experts analyze commercial real estate and REITs in 1Q24.
Private Markets

Private Credit Gained in 4Q23 but Lagged High Yield Benchmark

Constantine Braswell
Callan expert analyzes private credit activity in 1Q24.
Public Markets

Stocks Continue Rally; Bond Returns Fall Amid Rate Cut Uncertainty

Kristin Bradbury
Callan expert analyzes the performance of global markets in 1Q24 and the outlook for the year.
Public Markets

The Magnificent Seven and Large Cap Portfolios: What Institutional Investors Need to Know

Nicole Wubbena
What institutional investors need to know about the Magnificent Seven and large cap stock portfolios
Private Markets

Private Credit Performance Tops Leveraged Loan Index Over Long Time Periods

Catherine Beard
An update on private credit performance in 4Q23
Private Markets

Private Real Estate Falls but REITs Outpace Stocks

Munir Iman
An update on real estate and real assets performance in 4Q23.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.