This Weekly Financial Markets Update reviews the top market headlines: U.S. Equities, International Equities, Fixed Income

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Financial assets rebounded in 2023 after enduring widespread losses in the prior year. The U.S. economy proved more resilient than many pundits expected while inflation continued to moderate. Returns were particularly strong across both stocks and bonds in the fourth quarter as investors anticipated a less restrictive interest rate policy from the Federal Reserve.

U.S. Equities: Large capitalization stocks led U.S. market gains in 2023 (S&P 500 index, +26.3%), keyed by significant first-half surges among a concentrated group of bellwether technology-related stocks (the so-called "Magnificent Seven"). Smaller stocks advanced at a more measured pace through most of the year before catching a robust late-year tailwind that pushed them to double-digit returns on the year (Russell 2000 Index, +16.9%).

International Equities: International stocks slightly lagged broad U.S. indices in 2023 but also generated solid returns in their own right (MSCI ACWI ex USA index, +15.6%. Developed markets (MSCI EAFE index, +18.2%) bested emerging markets (MSCI Emerging Markets index, +9.8%), as the latter was dragged down by weakness in Chinese stocks. (All international stock index returns are quoted in U.S. dollar terms.)

Fixed Income: The Bloomberg U.S. Aggregate index logged its first positive annual return in three years (+5.5%), thanks to strong fourth quarter gains fueled by sharp declines in market yields amid moderating inflation readings and hopes of Federal Reserve rate cuts. Corporate issues enjoyed outsized returns (Bloomberg Corporate and Bloomberg High Yield indices, +8.5% and +13.4%, respectively), as credit spreads declined amid a resilient economic backdrop.

Commodities: Commodities were one of the few asset classes with disappointing results in 2023 (Bloomberg Commodity index, -7.9%), largely due to weakness in oil and natural gas prices. Gold, on the other hand, advanced by double-digits on the year while hitting an all-time high price in early December.

As of December 31, 2023 Month-to-Date Quarter-to-Date One-Year
MSCI All Country World 4.8% 11.0% 22.2%
S&P 500 4.5% 11.7% 26.3%
Russell 2000 12.2% 14.0% 16.9%
MSCI EAFE 5.3% 10.4% 18.2%
MSCI Emerging Markets 3.9% 7.9% 9.8%
FTSE NAREIT 9.9% 16.2% 13.7%
Bloomberg Commodity -2.7% -4.6% -7.9%
Barclays U.S. Aggregate 3.8% 6.8% 5.5%