The Stock Market Is Up For 12.4% Gain For 2023 So Far

The performance of the stock market in recent months has resulted in solid gains for fund investors in 2023.

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The S&P 500 officially entered a new bull market in June, defined by a 20% increase from the low point. This surge has been driven primarily by several large tech stocks, including Amazon.com, Tesla, and Nvidia.

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Although the market may appear top-heavy due to the dominance of these tech stocks, overall gains have been achieved by investors in mutual funds and exchange-traded funds (ETFs). According to Refinitiv Lipper data, the average U.S. stock fund recorded a 6.3% increase in the second quarter, bringing the year-to-date gain to 12.4%. Large-cap growth funds, which heavily feature these tech giants, experienced even higher gains with an average increase of 12.3% in the quarter and a year-to-date gain of 27.7%.

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International stock funds also saw positive growth, rising 2.7% in the quarter and achieving a year-to-date gain of 11.4%.

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Bond funds, however, experienced a slight decline in the quarter. Investment-grade debt-focused funds, the most common type of fixed-income fund, recorded an average decrease of 0.8%, resulting in a year-to-date gain of 2.2%.

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Despite the overall positive performance in stocks, risk-averse investors continue to allocate more of their investments to bonds. During the quarter, bond-focused mutual funds and ETFs attracted a net inflow of $58.8 billion, while U.S. stock funds experienced a net outflow of $44.4 billion. International stock funds received a relatively modest net inflow of $670 million.

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Looking ahead, investors are closely monitoring the Federal Reserve and its upcoming rate-policy meeting. The Fed has indicated the possibility of more rate hikes starting in July, considering inflation and unemployment. However, there is uncertainty regarding the second half of the year, with questions surrounding the sustainability of the tech sector's performance, the potential for other asset classes to step up, the direction of the oil market, and the outcome of the Ukraine conflict.

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Katie Nixon, Chief Investment Officer of Northern Trust Wealth Management, suggests that Fed policymakers aim to strike a balance between acknowledging progress made toward the inflation goal and managing market expectations. Despite the Fed signaling potential rate hikes, few investors believe that the central bank will implement the full amount during this cycle.

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