Every quarter, our portfolio managers and research analysts provide in-depth analysis and insightful commentary on stock market performance, analyzing the latest trends and behaviors impacting the market.
At KAR, we offer high-conviction investment strategies focusing on quality businesses, within the Small Cap, Mid Cap, Large Cap, and International spaces. We strive to design our portfolio strategies to be resilient in any market environment, and we believe our results speak for themselves.
In our Q2 2023 discussion roundup, you’ll find individual recaps of each of our actively managed strategies, all recorded in our stock market insights podcast, KayneCast. By subscribing to KayneCast, you’ll be automatically notified when future quarterly reviews are made available, ensuring you’ll always stay informed and up to date on our investment strategies.
You can read the full Q2 2023 market review in our provided commentary or revisit our past quarterly recaps:
- Q1 2023 Market Review: Stock Market Weathers Historic Banking Crisis
- Q4 2022 Market Review: Good News, Bad News
- Q3 2022 Market Review: Hiking in a Bear Market
- Q2 2022 Market Review: The Bear is Awake
To learn more about KAR’s investment management services, contact our team today.
Q2 2023 Stock Market Recap
Equities performed well in Q2 2023, led by the “Big Seven” tech companies (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla). Doug Foreman, Chief Investment Officer, explains these seven companies are best positioned to develop and take advantage of artificial intelligence. AI has been at the forefront of investor minds and “reached an inflection point” in Q2 2023.
Small Cap Quality Value
U.S. equities advanced in Q2, with the S&P 500 Index rising 8.7 percent and the NASDAQ Composite Index climbing 13.1 percent. At the same time, the Russell 2000 Value Index – the benchmark for KAR’s Small Cap Strategy – “was driven by companies with lower earnings’ quality, weaker balance sheets, and higher share price volatility.”
Small-Mid Cap Core
Equities advanced in the second quarter because of investor interest in large technology companies at the forefront of the artificial intelligence boom. Julie Kutasov, Portfolio Manager and Senior Research Analyst, notes, “the second quarter’s performance of the Russell 2500 Index, this strategy’s benchmark, was driven by companies with lower earnings quality, weaker balance sheets, and higher share price volatility.”
Small Cap Core
After four months of negative returns, Small Cap stocks rose in June, led by Energy, Consumer Discretionary, and Materials. While the yield curve remained inverted, the likelihood of a severe recession fell, calming the market and resulting in generally positive returns in Q2. The Russell 2000 Index skewed heavily towards lower quality during the quarter, with almost all metrics favoring low over high quality.
Mid Cap Sustainable Growth
Multiple events continue to threaten the global economy, including the Russia/Ukraine war, ongoing tension between the United States and China, and massive layoffs in the tech sector. In March, the markets endured the second and third largest bank collapses in U.S. history, the Feds continue their hawkish and unprecedented monetary policy to raise interest rates to combat inflation while shrinking its balance sheet, and the yield curve remains inverted.
Despite these concerns, the market remained bullish during Q2 2023. Chris Armbruster, Portfolio Manager and Senior Research Analyst, notes the S&P 500 posted an 8.7% return in the second quarter, bringing the YTD gains to 19.6%.
Global Dividend Yield
Technology-based mega-cap stocks drove stock market performance in Q2 2023. Global Dividend Yield Portfolio Manager and Senior Research Analyst, Richard Sherry, notes that while technology stocks are not typically high yielding, those with AI exposure had a solid second quarter.
Mid Cap Core
The Russell Mid Cap Index performed strongly in January only to see four straight months of negative returns. The March banking crisis aggravated fears of a coming recession. In June, indications the Fed was close to ending its hawkish inflation policy caused a surge in Mid Cap stocks, led by Industrials, Consumer Discretionary, and Materials.
International Small Cap
In early 2023, higher inflation, interest rates, and energy prices pushed the Eurozone into a technical recession. By Q2 2023, the market saw inflation abat. European small cap stocks rallied substantially.
This information is being provided by Kayne Anderson Rudnick Investment Management, LLC (“KAR”) for illustrative purposes only. Information contained in this material is not intended by KAR to be interpreted as investment advice, a recommendation or solicitation to purchase securities, or a recommendation of a particular course of action and has not been updated since the date of the material, and KAR does not undertake to update the information presented should it change. This information is based on KAR’s opinions at the time of the recording of this material and are subject to change based on market activity. There is no guarantee that any forecasts made will come to pass. KAR makes no warranty as to the accuracy or reliability of the information contained herein. Past performance is no guarantee of future results.