Third Quarter Market Review

Global stocks dropped after last quarter’s positive performance, with the MSCI All Country World IMI Index returning -3.4% over the quarter and underperforming global bonds for the first time in the past year, as measured by the Bloomberg Global Aggregate Bond Index. 5-year forward inflation expectations in the United States remained below 3% for the quarter, as the yield curve remained inverted for more than a year according to the 2- and 10-year spread. In particular, the 10-year Treasury yield rose by nearly 80 basis points to 4.6% this quarter, marking its highest level in approximately 16 years.

Globally, energy rebounded from its weaker performance in the first half of 2023 and was the best performing sector, returning 11.5% for the quarter. Comparatively, information technology, REITs, and utilities lagged the overall market. Large growth stocks were the biggest detractors,

as names like Apple returned -11.6% while Microsoft returned -7.1%. Value stocks generally outperformed growth stocks across US, non-US developed, and emerging markets, with the MSCI All Country World Value IMI Index outperforming its growth counterpart by 3.1%. In the US, the value premium was positive despite generally negative size and profitability premiums. Other developed markets saw positive size premiums yet faced negative profitability premiums, whereas emerging markets saw both positive size and profitability premiums. Despite mixed size and profitability premiums across regions, the value premium in the United States and globally was strong for the quarter, as value stocks outperformed growth stocks in every region and generally across small and large caps. The value premium was especially strong within developed markets outside of the US, with the MSCI World ex USA Value index outperforming the MSCI World ex USA Growth index by 8.4% for the quarter.

Past performance is no guarantee of future results.

In USD. July 1926–June 2023. Quarterly returns for value and growth based on the Fama/French US Value Research Index and the Fama/French US Growth Research Index, respectively. Data provided by Fama/French. The Fama/French indices represent academic concepts that may be used in portfolio construction and are not available for direct investment or for use as a benchmark.  Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. See “Index Descriptions” for descriptions of the Fama/French index data.

Index Descriptions: Fama/French US Value Research Index: Provided by Fama/French from CRSP securities data. Includes the lower 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973). Fama/French US Growth Research Index: Provided by Fama/French from CRSP securities data. Includes the higher 30% in price-to-book of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).


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