After a stormy 2022, US stocks gained during the first quarter of 2023 in a surprise show of resilience despite a banking crisis, cryptocurrency meltdowns and uncertainty about what's ahead for the economy.
What happened: Nothing about the first quarter's performance was linear.
The broad-based S&P 500 seesawed throughout the quarter, ending January on a high note before tumbling in February, rising again in March and ultimately ending the quarter up about 7%.
The tech-heavy Nasdaq made a remarkable resurgence, soaring nearly 17% in its best quarterly gain since the fourth quarter of 2020.
Some other highlights:
▸ Bond prices rose as investors wagered that the Federal Reserve won't raise rates as high as previously expected due to the banking crisis.
▸ Bitcoin gained as investors rushed to find safer alternatives to the banking system. The digital asset had tumbled earlier in the quarter after a slew of controversies hit the cryptocurrency market, including the Commodity Futures Trading Commission's lawsuit against Binance alleging that it violated US trading laws and the collapse of crypto-friendly bank Silvergate.
▸ Oil prices ended the quarter down as the banking crisis fueled fears of prolonged stress in the financial sector and a potential recession.
What's next? Despite the first quarter's strong performance, investors say that celebrating a Fed victory against inflation would be premature.
Earlier this month, the collapse of three financial institutions — Silicon Valley Bank, Signature Bank and Credit Suisse — set off a banking meltdown that sent markets teetering.
Wall Street largely shrugged it all off, however, with stocks recouping their losses — and then some — as investors started snapping up tech stocks, boosting the broader equity market.
But that doesn't mean that inflation isn't still a key factor driving the market.
Here's what Wall Street experts are saying:
▸ "I just don't think that we're going to get inflation down without seeing pain in the market. So, in order for it to stabilize, I think firstly we probably have to give some of these rallies back," said Liz Young, head of investment strategy at SoFi Technologies.
▸ "We're in the middle of this taming of inflation experiment," said Scott Duba, chief investment officer at Prime Capital Investment Advisors. "Expect the unexpected."
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