First Quarter Investment Review

Despite many mixed signals about the health of the economy, the first quarter of 2023 generally saw some positive developments for both domestic and global investment markets.  While this is by no means a signal that markets are well on their way to a full recovery, it is nevertheless important to recognize the recent investing trends.

Equity Markets Recover More of their 2022 Losses

The US Stock Market, as measured by the Russell 3000 Index, experienced a 7.18% gain in the first quarter of 2023.  More impressively, international developed market equities, as measured by the MSCI World ex-USA index, shot up 8.02% in the first quarter.  

While the news wasn’t as good as it was for the US or global developed markets, emerging markets also experienced a positive first quarter.  The MSCI Emerging Markets Index saw a 3.96% gain in the first quarter of 2023.

Bond Markets Recover Slightly

The good news was not constrained to equity markets only in the first quarter.  Domestic and international bond markets experienced slight recoveries despite challenging market conditions and the specter of future interest rate increases.  The Bloomberg US Aggregate Bond index, which measures the overall US Bond Market, experienced a 2.96% gain in the first quarter of 2023.  The international bond market fared almost as well, as the Bloomberg Global Aggregate ex-USD Bond index gained 2.86% in the first quarter.

Both results are positive developments for markets that experienced heavy losses in 2022 as central banks and the Federal Reserve rapidly increased interest rates in efforts to tame inflation both domestically and abroad.

Mixed Results in Other Asset Classes

Two other closely watched asset classes experienced mixed results in the first quarter of 2023.  Commercial real estate in the US saw a modest gain in the first three months of 2023.  The Blomberg US Select REIT index gained 2.77% from January 1st through March 31st

On the other hand, commodities fared worse than real estate.  The Bloomberg Commodity Total Return index lost 5.36% in the first quarter of 2023.  The best commodities for the first quarter were sugar with an 18.87% gain, followed by copper with a 7.09% gain.  The worst commodities in the first quarter were natural gas, which experienced a 50.99% loss and nickel which saw a 21.38% loss. 

Real estate and commodities have been closely watched by many analysts and investors as many have expected real estate to struggle with rising interest rates and lower expected occupancy rates due to sluggish demand caused by a slowing economy.  Commodities are often seen as a safe haven in times of higher inflation, so the negative returns for the aggregate index might have been a surprise to many. 

Both results reinforce how difficult it can be for individual investors to anticipate market movements in the face of various economic factors, and highlight the benefits of following disciplined investment strategies.

Sources:  Dimensional Fund Advisors,