According to new analysis and insights from Morningstar Indexes, 2023 has reinforced that investors can never truly predict how the market will behave and every market cycle is different.
- Rates are up, but banks are largely down with a 24.5% year-to-date loss for the Morningstar US Regional Bank Index.
- Stocks and bonds have climbed in lockstep after a year in which simultaneous cross-asset class losses had some experts predicting “the death of the 60/40 portfolio.”
And, in a year which has included a run on financial institutions linked to venture capital and cryptocurrency, the demise of a 167-year-old Swiss bank and an unrelenting attack on inflation through interest rate hikes by the Federal Reserve and other central banks, global equity and fixed income markets have defied the odds. The Morningstar Global Markets Index and the Morningstar Global Core Bond Index are up 8.4% and 2.3%, respectively, through April 17.
Stocks, Bonds, and a Balanced Portfolio Have Shaken Off Rising Rates in 2023. Banks, Not So Much.
Dan Lefkovitz, Morningstar Indexes Strategist:
“Investors are often told that banks benefit from higher rates. But magnitude clearly matters, and the broader context is critical. It’s reminiscent of last year when dividend-paying stocks performed well, defying the conventional wisdom that rising rates make dividends less attractive. Meanwhile, you’ll notice no one is complaining about the breakdown of diversification in 2023, because stocks and bonds are both up. Investors should question the conventional wisdom about the forces that move markets, how assets interact, and which investments best suit the macro environment.”
You can find additional insights from Dan in his new research paper, Despite Rising Rates, Banks Are Down While Stocks and Bonds Are Up.
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