Overtime

2023 Recap

Good morning,

This week’s Overtime is a recap of all things 2023. I’ll provide the hard numbers and the charts that tell the most important stories of 2023.

Let’s get into it!

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2023 Performance

Large Growth leads the style boxes

Using iShares Russell index ETFs, large growth outperformed the next-best performing square of the style box by more than 15%. Interestingly enough, large-cap value was the worst-performing area, behind even small and mid-cap value.

Tech and then the rest

The disparity between the haves and have not in 2023 is even more clear when looking at things on a sector level. Technology and communications returned more than 50% in 2023, while the 4th best sector returned less than one-third of that. Three sectors (staples, energy, and utilities) were outright negative.

Even small-caps outperform international equities

For all the talk of small-cap underperformance, the late-year surge put small-caps ahead of foreign-developed (EAFE) stocks and gold which gained more than 13% in 2023. Diversified commodities were the only major asset class negative, dragged lower by oil/energy prices.

High yield leads fixed income

Morningstar chart used to show Total Returns, other charts are price return only

Core bonds broke a two-year losing streak with the US Aggregate Bond ETF posting a 5.6% total return in 2023. But it was high yield that led all fixed income sub-sectors as corporate spreads tightened significantly throughout the year. HYG finished the year with an 11.5% return, just ahead of local-currency EM debt.

Most commodities flat on the year

Gold was up double-digits in 2023, but is essentially flat over the past several years, trading in a large potential base. That’s a similar story for most other commodities in 2023, which were mostly unchanged. Oil was the weakest, with WTI crude falling 11.6%.

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The most important technical stories

Just a bit outside

The above chart appeared in the December 12, 2022 Monday Morning Playbook. Going into last year, the average strategist forecast was for negative stock returns for the first time on record. Based on 2023’s stock performance, I would nominate this for the contrarian indicator Hall of Fame.

Best year for the Nasdaq 100 since 1999