Q2 2023 Wrap-Up

July 25, 2023

The second quarter began with concerns over bank failures, debt ceiling debates in Washington, and inflation… and ended with the S&P 500 notching another strong quarter, advancing 8.7% and bringing its 2023 return to 16.9% (through June 30, 2023), only 8% below its all-time high. As of the publishing of this wrap-up on, the S&P is up another 3%, sitting only 5% shy of reaching a new all-time high. International equities also had positive performance in the second quarter, advancing 2.5% and bringing their 2023 return up to 9.1%. What drove this positive momentum? Stabilization in the banking sector, compromise on the debt ceiling, and positive economic data.

As we move into the second half of the year, I'd like to touch on the three major topics that will influence markets moving forward: Inflation, Interest Rates, and Economic Growth.


June’s CPI data showed a continued improvement on the inflation front, with core inflation decreasing to 3%.

Source: U.S. Bureau of Labor Statistics

While promising to see inflation returning to a range that The Fed feels comfortable with, it is important to note that this is still above their 2% target, and The Fed has yet to signal “mission accomplished.”

Interest Rates

Markets are currently pricing in just one more rate hike in late July. With that said, the expectation of rate cuts moved significantly during the quarter. In April, the expectation was that The Fed would commence rate cuts in September 2023. Currently, the expectation is that no rate cuts will occur until June 2024. This seems much more reasonable as the economy (and especially markets) have proven very resilient to the rate increases thus far. It’s quite extraordinary that rates have moved from 0% to 5% since February 2022, and the S&P 500 is basically flat during that time. As detailed in our blog post 12 months ago, a path to a soft landing was feasible, and so far, so good.

Economic Growth

Moving forward, economic growth, and the ability to maintain it, will be the key force driving market performance. In truth, this always has been the case long-term. Second quarter GDP is estimated to be 2.4% (as of 7/19/2023 per Atlanta Fed GDPNowTM). As long as economic growth remains positive, The Fed will likely maintain its current interest rate policy (and rightfully so).

Closing Thoughts

The first half of the year has provided strong returns for investors, both in US markets and abroad. While negative news stories may have dominated the headlines, positive economic data remained pervasive under the surface. In spite of the strong first half of 2023, markets are still below their all-time highs. Additional positive economic data and continued progress on inflation will likely be required to set new highs.

As usual, I am optimistic for investors with a financial plan, diversified portfolio, and long-term outlook.


This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

Frankly Finances is a registered investment advisor with the state of Florida and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. Registration does not imply a certain level of skill or training. Please refer to our Form ADV Part 2A disclosure brochure for additional information regarding the qualifications and business practices of Frankly Finances.

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