Financial markets continue to grapple with uncertainty.  The 3rd quarter saw most investment types down for the quarter.  The table below shows returns for investable ETFs representing the most common investment types.  We like to use ETFs versus indices to evaluate returns as they include transaction cost and fees while indices do not.  In this update we will examine the performance of each major investment type through September 30, 2023.


Stocks were volatile this quarter and ended up down about 3% from July 1 through September 30.  Value oriented stocks and international stocks held up just a little bit better, down about 2%.  Smaller company stocks were down by a larger amount, about 5%.

Cumulatively, however, stocks have performed well this year.  They have done better than expected given that earlier this year there were fears of a potential recession.  Year to date for the first three quarters of 2023 large company stocks were up about 13%, technology/growth oriented stocks were up 35% (QQQ) and international stocks were up about 10%.  Value and small cap stocks were up but considerably less.


The bond market overall was also down for the quarter about 3%.  BND represents the broad bond market including bonds of all maturities.  Intermediate maturity bonds were down about 2%.  Short term bonds and inflation protected bonds on the other hand were both up for the quarter. 

The same trend is evident year to date.  Overall intermediate and long term bonds were down slightly year to date while short term bonds and inflation protected bonds were up about 2%.

Alternative Investments

Alternative investments can include real estate, commodities, private capital and a variety of other investments.  Here we include two traded ETFs representing real estate (VNQ) and commodities (DBC).  Real estate was down 8.6% for the quarter and 5.4% year to date in 2023.  Commodities had a great quarter – up 10% but are only up 1.3% year to date in 2023.

Diversified Portfolio

There are some iShares ETFS representing different levels of diversification from about 40% stocks and 60% bonds to 80% stocks and 20% bonds.  Most diversified investors have portfolios with between 60% and 80% stocks depending on their ability and willingness to take risk.  These diversified portfolios were down for the quarter just over 3% in line with stock and bond returns.  Year to date they were up 6% to 7.4%

Looking Forward

Thus far the Federal Open Market Committee has managed to slow the economy down by raising interest rates without pushing the economy into a recession.  Risk remains that they could go to far or that other events might cause a U.S. or global recession.  Overall stocks are also priced at a high level relative to history.  I would therefore expect more modest stock returns over the coming years with continued volatility.  The bond yield curve (see US Treasury Yield Curve) remains inverted with the best yields available for short-term bonds.  At some point there will be more attractive opportunities for intermediate term bonds, but not yet in our view.

Third Quarter 2023 Market Update