Stock Funds Are Up 16.7% for 2023
The stock-market rally kept investors bullish—to a point. The Fed’s moves still will call the tune. Regional-bank stocks have partially repaired themselves. Illustration: Giacomo Bagnara By William Power Aug. 6, 2023 12:00 pm ET This is good, as long as it lasts. That’s what many stock-fund investors are feeling, coming off a July when stocks kept rising. Even regional-bank stocks, which were pummeled by the spring’s banking crisis, had a solid month, with the KBW Nasdaq Regional Banking index up 18%, its best month since November 2016. But stock investors are still at the mercy of the Federal Reserve and its interest-rate boosts, and relying on earnings gains at companies both large and small. As August began, rising bond yields, in the wake of America’s credit downgrade, caused s
Regional-bank stocks have partially repaired themselves.
Illustration: Giacomo Bagnara
This is good, as long as it lasts.
That’s what many stock-fund investors are feeling, coming off a July when stocks kept rising. Even regional-bank stocks, which were pummeled by the spring’s banking crisis, had a solid month, with the KBW Nasdaq Regional Banking index up 18%, its best month since November 2016.
But stock investors are still at the mercy of the Federal Reserve and its interest-rate boosts, and relying on earnings gains at companies both large and small. As August began, rising bond yields, in the wake of America’s credit downgrade, caused stock-market angst.
The average U.S.-stock fund rose 3.8% for July, according to Refinitiv Lipper data, to expand the gain to 16.7% for the year to date.
“Markets may be pricing in the best of both worlds: a soft landing [for the economy] atop a solid foundation,” says Saira Malik, chief investment officer at Nuveen. But she notes that interest rates will likely remain elevated after the Fed’s rate-increase campaign stops. Higher rates and the impact of hawkish monetary policy that began in 2022 “will eventually take their toll on economic growth, regardless of current market bullishness,” she says.
International-stock funds were up 2.9% during the month, and are up 14.6% for the year to date.
In addition to the rally in regional-bank stocks, which have been weak since the collapse of Silicon Valley Bank, financial-services stocks in general had a good month. Lipper’s financial-services fund category was up 9.4% for the month, to pull the category into the black for the year, at 2.6%.
Bond funds were little changed, on average, during a month when the Fed resumed lifting interest rates, with a quarter-percentage-point increase. The main concern for bond investors is whether there will be additional increases, as the Fed battles inflation.
Funds focused on investment-grade debt (the most common type of fixed-income fund) rose an average of 0.1%, to leave their year-to-date gain at 2.3%.
William Power is deputy section editor of Journal Reports in South Brunswick, N.J. Email him at [email protected].
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