The S&P 500 hit 22 new all-time highs in the first quarter alone, with just a 1.7% maximum drawdown in the first three months.

At the outset of 2023, nearly every economist believed the U.S. economy was headed for a recession. Equity markets told a different story.

To sum up the third quarter in a single sentence: long-term interest rates went up a lot, and stocks went down modestly.

For the past year, many economists and major banks have been forecasting a looming economic downturn in the US. It didn’t arrive in the first half of 2023.

News in the first quarter was dominated by the high-profile failures of Silicon Valley Bank and Signature Bank New York on March 10.

Historically, bull markets have started when the economy is at its weakest and corporate earnings are approaching a trough, both of which are conditions we could see materializing in the coming months. 

Inflation essentially plateaued at elevated levels while the labor market continued to post relatively strong job and wage gains. The July stock market rally quickly faded, and the S&P 500 index ended the third quarter with a -4.9% loss.  

With the Federal Reserve shifting into hawkish monetary policy and fiscal stimulus long gone, stocks have undergone a rapid adjustment to the altered environment.

Stocks started the new year on a volatile note.