Despite Volatility, U.S. Stocks, Bonds, And Gold Rises In Q1

April 1, 2023

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In the first quarter of 2023, U.S. financial assets saw broad gains, but not without some turbulence along the way.

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Stock and bond markets rose in January on hopes that central banks around the world, led by the Federal Reserve, would soon stop raising interest rates. This could even pave the way for rate cuts by the end of the year.

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Nevertheless, February GDP numbers that were stronger than expected crushed those aspirations. However, in March, two significant U.S. banks went under, and Swiss regulators compelled Credit Suisse, the world's largest bank, to be taken over, bringing an end to its 166-year history. That sparked worries of a global banking crisis spreading, which led investors to switch from stocks to safer assets like bonds.

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By the end of the month, those concerns had subsided, with investors boosting their hopes that the Fed would drop rates by the end of the year—especially after the Fed signaled last week that it would at least halt its rate-cutting campaign.12

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Here's a look at how different assets performed in the first quarter:

Stocks

The S&P 500 had its best January since 2019, while the tech-heavy Nasdaq Composite had its best start to the year since 2001.

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Despite volatility later in the quarter, the S&P 500 gained 7%, building on a late-2022 rise. The Nasdaq Composite increased by 16.8%. The Dow Jones Industrial Average eked out a 0.4% gain.

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Among the S&P 500 Index, tech companies led the way with 87% increases for NVIDIA (NVDA), 73% gains for Meta (META), and 59% gains for Tesla (TSLA).

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Individual bank stocks plummeted the most, as expected. Zions Bancorp and First Republic Bank (FRC) both had value losses of 89%. (ZION) fell 38%. Investors were concerned that Charles Schwab (SCHW) would experience unrealized losses when they switched to money-market funds, causing the stock to drop 37%.

Bonds

The first quarter of this year saw a minor improvement in the performance of the U.S. bond markets, which had had their worst returns in the previous year.

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The ten-year U.S. Treasury yield was 3.88% at the start of the year and 3.54% after the quarter. It fluctuated between a low of 3.30% and a high of 4.05%. The Bloomberg U.S. Aggregate Bond Index increased 2.5% during the three months.

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Gold

Gold prices, the ultimate haven asset, soared as investors looked for less risky investments toward the end of the quarter.

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Spot gold rose 8.5% for the quarter to $1,977.96 per troy ounce, close to an all-time high and its highest level since March 2022.

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Crude Oil

Throughout the quarter, oil prices varied, plunging precipitously as worries about the banking system surfaced before rising along with stock prices soon before the quarter's end.

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In the previous three months, the price of West Texas Intermediate (WTI) oil futures for May delivery dropped by 3.6% to $75.56 a barrel.

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Real Estate

Increasing mortgage rates have put pressure on the U.S. housing market, where there is still a shortage of inventory for buyers. At the same time, the commercial real estate market is experiencing an oversupply of office space since employees have not yet fully recovered from the epidemic.

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The FTSE Nareit U.S. Composite Real Estate Index, however, only had a 1.7% decline during the quarter. The typical fixed 30-year mortgage rate decreased somewhat by 10 basis points to 6.32%.

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