Stock Funds Rally to 12.4% Gain for 2023 So Far
A 6.3% advance for the second quarter in a top-heavy market Fund focused on large tech stocks are doing well, but wary investors are sending more money to bond funds. Illustration: Giacomo Bagnara By William Power July 9, 2023 11:00 am ET The stock-market bull is clearing a path for solid gains for fund investors so far this year. The S&P 500 entered a new bull market in June, by the common definition of a 20% gain from the low. Several large tech stocks are responsible for the surge, including Amazon.com, electric-car maker Tesla and chip maker Nvidia. So it’s a top-heavy market, but t
Fund focused on large tech stocks are doing well, but wary investors are sending more money to bond funds.
Illustration: Giacomo Bagnara
The stock-market bull is clearing a path for solid gains for fund investors so far this year.
The S&P 500 entered a new bull market in June, by the common definition of a 20% gain from the low. Several large tech stocks are responsible for the surge, including Amazon.com, electric-car maker Tesla and chip maker Nvidia.
So it’s a top-heavy market, but that has meant overall gains for investors in mutual funds and exchange-traded funds. The average U.S.-stock fund rose 6.3% for the second quarter, according to Refinitiv Lipper data, to push their year-to-date gain to 12.4%. And specifically for large-cap growth funds, which are full of the large techs, the quarter’s gains averaged 12.3%, to push the year-to-date gain to 27.7%.
International-stock funds rose 2.7% in the quarter, to push their year-to-date gain to 11.4%.
Bond funds eased in the quarter. Funds focused on investment-grade debt (the most common type of fixed-income fund) fell an average of 0.8%, to trim their year-to-date gain to 2.2%.
Risk-averse investors are putting more money into bonds than stocks, however. Investors poured a net $58.8 billion into bond-focused mutual funds and ETFs during the quarter, based on Investment Company Institute estimates. Investors pulled a net $44.4 billion from U.S.-stock mutual funds and ETFs and put a relatively modest $670 into international-stock funds.
As always, investors’ attentions are on the Federal Reserve and its next rate-policy meeting in two weeks. “Both inflation and unemployment are not moving as fast as the Fed would like and they have indicated more rate hikes starting in July,” says Rob Kantor, co-chief investment officer and co-founder of XML Financial Group in Bethesda, Md.
“It is a bit of a guessing game for the second half,” says Kantor. “Can tech continue its flurry, can another asset class step up, will oil continue its slide, what will happen in the Ukraine war?”
Katie Nixon,
chief investment officer of Northern Trust Wealth Management in New York, says it seems that Fed policy makers “want to walk the fine line between acknowledging progress made toward the inflation goal and ensuring that the financial markets do not get overly optimistic that progress will continue at an acceptable pace.”The Fed in June signaled that it could raise rates twice more this year, by a total of 0.50 percentage point. But based on investor reaction, Nixon says, “The market is essentially saying, ‘I’m calling your bluff.’ ” Few investors believe that the Fed will raise rates by that amount during this cycle, she says.
William Power is a Wall Street Journal features editor in South Brunswick, N.J. Email him at [email protected].
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