By Haddon Libby

We are two-thirds of the way through 2023 and returns for investors have been surprising good.  Where many economists and market pundits expected the economy to have slipped into recession by now, it continues to chug along despite higher interest rates, oil prices and inflation.  While many Americans struggle to pay the bills, the economy is holding up.  This is most evident in a job market where unemployment remains historically low.

Through the first eight months of the year, the S&P 500 is up 19%, the Dow 6% and Eurozone 15%.  The strength of the S&P 500 is largely due to the performance of a small handful of the largest stocks in the index.  The index is weighted by the market value of each company so megacap stocks represent nearly one-third of the index while the other 493 represent two-thirds of results.

The most valuable stock in the world – Apple – is up 45% this year.  Other megacaps are up significantly with Microsoft +38%, Amazon +64%, NVIDIA +232%, Google +53%, Meta (aka Facebook) +146% and Tesla +97%.


The technology sector is up 44% in 2023.  This largely reverses the declines of 2022.  NVIDIAs $40,000 generative artificial intelligence chip has invigorated the sector as this advance has the potential to change the way most of us live and work.  Investors see this as good for stock prices as businesses have the potential to become significantly more efficient (aka need fewer people).

The worst performing market sectors in 2023 is Utilities down -12%.  Other down sectors include Healthcare -2%, Real Estate and Consumer Staples (both down fractionally).  Higher interest rates impact utilities as these companies typically hold large amounts of debt which costs more as rates rise.  Lower profit margins when combined with increased weather events and lower office occupancy rates all weigh on this sector.  Healthcare continues to struggle as the industry suffers through lower post-COVID revenues while drug prices decline as more go generic.

Chinese stocks continue to struggle, down 5% after losing 20% of their value in 2022.  China has struggled to emerge from COVID lockdowns while many Chinese have lost a lifetime of savings thanks to the failure of many land development companies.  While the country may eventually bail out its citizens, this has the potential to hit the Chinese economy as the US housing crisis of 2007 caused the Great Recession.  Unemployment amongst Chinese youth is over 20% as international companies leave the country as the communist country is increasing viewed as an unreliable manufacturing location.

Here at home, the real estate sector continues to hang in there, down fractionally on the year.  While higher interest rates and low occupancy rates in commercial real estate may cause problems in the not too distant future, the favorable borrowing terms of only two years ago continue to underpin prices.

Those looking for more predictable investment returns can thank the Federal Reserve for interest rates that provide an alternative to stocks.  U.S. Treasury bills with maturities of less than one year have yielded as much as 5.4%.  When you consider that T-bills are state tax exempt, this results in a 5.9% effective yield for those in the top tax bracket.

Borrowers on the other hand have seen interest payments climb quickly over the last two years.  While interest rates may be peaking, those with variable rate loans or facing a refinancing may face challenges as interest payments skyrocket.

Looking ahead, market forecasters believe that corporate earnings have troughed.  This means that results should begin to strengthen in subsequent quarters.  If this is true and the U.S. economy can avoid a recession, stock prices may well move higher.

Then again, forecasters called 2023 incorrectly.

Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management.  As a reminder, this article is for entertainment purposes and not meant as a recommendation of any kind.  If you want a recommendation, please contact us or via