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Quarterly markets review - Q2 2023

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Summary

In Q2 2023, developed markets led equities higher while emerging markets lagged behind. Technology stocks were boosted by enthusiasm for Artificial Intelligence (AI). Major central banks raised interest rates, although the US Federal Reserve elected to stay on hold. US stocks led the advance, while Eurozone and UK stocks had mixed performances. Japan, Asia (ex Japan), and Emerging Markets also had mixed performances. Government bond yields rose, with some divergence in the UK and Australia due to higher-than-expected inflation. Corporate balance sheets were relatively strong. Convertible bonds benefited from strong "big tech" stock performance, while commodities mostly declined. Digital assets were mixed, with Bitcoin returning 6.9% and Ethereum returning 6.0%. Regulation continued to be a major topic, with the European Union adopting MiCA and the US Congress and House discussing various bills.

Q&As

What sectors led the stock market advance in Q2 2023?
The IT sector, consumer discretionary and communication services sectors led the stock market advance in Q2 2023.

What were the top-performing index markets in emerging markets in Q2 2023?
Hungary, Poland and Greece were the top-performing index markets in emerging markets in Q2 2023.

What were the main factors that weighed on UK equity performance in Q2 2023?
The large UK-quoted diversified energy and basic materials groups were the most significant detractors amid broad-based weakness in commodity prices and concerns over the outlook for the Chinese economy. Sterling strength also weighed on these resources sectors, as it did other significant US dollar earners such as consumer staples.

How did the US Federal Reserve (Fed) act in the period under review?
The Federal Reserve (Fed) raised interest rates by 25 basis points (bps) in May, but did not hike rates in June, adopting what economists have termed a “hawkish pause”. The “dot plot” of rate predictions indicated two further rate rises in 2023.

What was the performance of digital assets in Q2 2023?
Bitcoin returned 6.9% and Ethereum (ETH) returned 6.0% in Q2 2023. For the year-to-date, Bitcoin and ETH returned 84.3% and 61.6% respectively.

AI Comments

👍 This article is incredibly informative, providing a comprehensive overview of the quarterly markets review for Q2 2023. It covers each sector in detail and provides an excellent overview of the global macroeconomic situation.

👎 This article is overly long and seems to be bogged down by too much detail. There is a lot of text to get through, and it can be difficult to parse the information efficiently.

AI Discussion

Me: It's a Quarterly Markets Review, looking back at the events of the second quarter of 2023. It looks at global, US, Eurozone, UK, Japan, Asia (ex Japan), and Emerging Markets equities and bonds, as well as commodities and digital assets.

Friend: Wow, that's a lot of information! What are some of the key takeaways?

Me: Some of the key takeaways include US equities performing well due to moderating inflation and resilient economic growth; Eurozone equities being boosted by the IT sector due to enthusiasm around AI; UK equities being weighed down by higher-than-expected inflation and rate hikes; Japan's equity market reaching a 33-year high; US debt ceiling uncertainty; and a general underperformance of emerging markets due to tensions between the US and China.

Action items

Research the different regulatory frameworks for digital assets in the US and Europe.
Analyze the performance of different asset classes in Q2 2023 and compare to other quarters.
Create a portfolio of investments that takes into account the different macroeconomic and geopolitical factors discussed in the article.

Technical terms

AI (Artificial Intelligence): AI is a type of computer technology that is designed to simulate human intelligence and behavior. It is used in a variety of applications, such as robotics, natural language processing, and machine learning.
Basis Points (bps): Basis points are a unit of measure used to describe the percentage change in the value of a financial instrument. One basis point is equal to 0.01%, or one one-hundredth of a percent.
CPI (Consumer Price Index): The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a basket of goods and services. It is used to measure inflation and is one of the most widely used economic indicators.
Dot Plot: A dot plot is a graphical representation of data points, typically used to show the distribution of values for a given variable. It is a type of scatter plot, in which each data point is represented by a dot.
GDP (Gross Domestic Product): Gross Domestic Product (GDP) is a measure of the total value of all goods and services produced in an economy over a given period of time. It is used to measure the size and health of an economy.
PMI (Purchasing Managers' Index): The Purchasing Managers' Index (PMI) is an economic indicator used to measure the performance of the manufacturing sector. It is based on a survey of purchasing managers in the manufacturing sector and is used to gauge the health of the economy.
Yield: Yield is a measure of the return on an investment. It is typically expressed as a percentage and is calculated by dividing the amount of money earned from an investment by the amount of money invested.