Market Performance in 2023

Despite a strong performance in 2023, the Nasdaq Composite, which has a heavy weighting in technology stocks, ended the year down compared to the end of 2021. According to BofA Global Research equity and quant strategists, the S&P 500 index is now up 3% in two years, while the Nasdaq Composite is still down 2% since the end of 2021 despite a significant gain in the final two months of 2023. Notably, Tesla Inc., Amazon.com Inc., and Google parent Alphabet Inc. remain in negative territory since 2021.

Recovery After a Challenging Market

Although equities and bonds in the U.S. rebounded in 2023 following a difficult 2022, certain sectors of the market, such as the Nasdaq, are still working to recover from their previous losses. FactSet data reveals that shares of Tesla have declined by 29.5% over the past two years, Amazon fell by 8.9%, and Alphabet experienced a 3.6% loss during the same period.

The Impact of Big Tech

The S&P 500's gains in 2023 were largely driven by Big Tech, also known as the Magnificent 7. This group includes Apple Inc., Microsoft Corp., Nvidia Corp., and Facebook parent Meta Platforms Inc. However, despite this positive contribution, the S&P 500 still only made marginal gains since the end of 2021.

Comparative Performance

On a total return basis from the end of 2021 to 2023, the S&P 500 index increased by 3.4%, whereas the Nasdaq Composite saw a decline of 2.4%, according to FactSet data.

ARK Innovation ETF's Recovery Efforts

ARK Innovation ETF, managed by Cathie Wood, attracted significant attention in 2023 due to its focus on disruptive innovation as an investment theme. The ETF even outperformed the gains of the Nasdaq-100 index. However, it is worth noting that the fund is currently trying to bounce back from significant losses accumulated since 2020.

The ARK Innovation ETF: Rebounding After Losses

The ARK Innovation ETF, unlike the Nasdaq-100 index which focuses on non-financial stocks and technology, faced a decline in 2021 and struggled to recover from consecutive annual losses. However, it seems to be rebounding in 2023.

Massive Quarterly Rally for Cathie Wood's ARK Innovation ETF

Cathie Wood's ARK Innovation ETF has recently experienced a significant quarterly rally, showing promising signs of growth and innovation in 2023. This positive momentum could help to make up for the losses incurred in previous years.

Cathie Wood's ARK Innovation ETF in 'Breakout Mode'

In addition to its recent rally, Cathie Wood's ARK Innovation ETF has entered a 'breakout mode'. This suggests that it has triggered a bullish pattern, indicating potential further growth and positive performance.

Mixed Results for Bonds in 2023

Investment-Grade Corporate Bonds: A Recovery with Room for Improvement

Although investment-grade corporate bonds showed an 8% gain in 2023, they are still down 8% over the past two years. While they have made progress, there is still room for improvement in this sector.

Long-Term Treasurys: Lagging Behind

Long-term Treasurys managed to gain slightly in 2023. However, they have been the worst-performing asset class over the past two years, with a significant loss of 26%. This indicates that long-term Treasurys have a long way to go to catch up to other investment options.

Stock Market Decline and Little Change in Treasury Yields

Amidst these developments, the U.S. stock market experienced a decline in early afternoon trading on Wednesday. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite were all down at last check. On the other hand, Treasury yields remained relatively stable, with the 10-year rate hovering around 3.94% in early afternoon trading on Wednesday.

'One of the Most Aggressive Rallies' in Decades

Interestingly, Deutsche Bank's chart shows that the recent market rally has been one of the most aggressive in decades. This momentum has helped to flip bond losses into gains for the year 2023, bringing some relief to the fixed-income market.