Quarterly Investment Review

A message from the Investment Management Team of Strategic Advisers LLC

By Brian Enyeart, CFA®,* President, Strategic Advisers LLC- Third Quarter 2023 Review

Third Quarter 2023: Key Takeaways


Both stocks and bonds1 slipped during the quarter despite ongoing economic growth in a late-cycle expansion.


We added some exposure to stocks but remained cautiously positioned. 


Higher interest rates led to economic growth concerns and weighed on U.S. stock market performance.2 Rising interest rates also led to a decline in bond markets.


Given the recent strength of the U.S. economy, we do not believe a recession is imminent. 

Market Backdrop

The U.S. economy was resilient for the quarter even as U.S. stocks3 fell. 

  • U.S. economy remained in the late phase of the business cycle.
  • The U.S. Federal Reserve (Fed) paused interest rate hikes as inflation fell. 

The U.S. witnessed mixed economic signals. Unemployment hovered near historic lows and consumer spending stayed positive. However, manufacturing activity remained weak4 and employers began posting fewer job openings. Inflation declined from its June 2022 peak but remained high. The Fed indicated that it may raise rates once more this year. It may also keep rates higher into 2024 as it seeks to drive inflation lower. 

Outside the U.S., China faced economic challenges. These challenges caused a ripple effect as stocks declined across both emerging and international developed markets.5 Japanese stocks had a strong quarter, as Japan experienced ongoing economic growth. On the flip side, Latin American stocks struggled as the region grappled with inflation.

Bonds fell during the quarter, dragging returns into negative territory for 2023.6 The U.S. government issued more bonds than expected to cover higher interest rate expenses. Total return for bonds comes from two things: yield income and price appreciation. Despite their recent volatility, we believe the outlook for investment-grade bonds is positive for long-term investors. They offer compelling yield income over the coming years, and they may appreciate in price when the Fed eventually reduces interest rates. 


We increased exposure to stocks but remained prudent about adding risk.

  • Within stocks and bonds, we aligned allocations to be closer to longterm targets in an effort to help reduce risk. 

U.S. Stocks

We added exposure to U.S. stocks as the risk of an imminent recession stayed low. We favored core, research-driven managers.7 These managers have historically tended to do well during late cycle. Core managers invest in stocks based on individual company characteristics, like valuations and earnings outlooks, rather than favoring sectors or disciplines.8 We also favored managers who invest in quality stocks. These investments tend to have stable earnings and low levels of debt. They have also historically tended to perform well during late cycle. Additionally, we increased our exposure to low volatility stocks because they tend to experience less turbulence than the broader market.

We have favored larger allocations to value and small-cap stocks relative to growth and large company stocks. We believe both growth and large company stocks have been relatively expensive.9

International Stocks 

Similar to U.S. stocks, we emphasized core managers across international stocks. We added some exposure to both international developed and emerging markets. We maintained our preference for emerging markets over developed international markets because we believe their long-term outlook has been more favorable.

Within international developed markets, we have favored managers who invest in large multinational businesses. These businesses sell goods and services around the world. As a result, they tend to be less impacted by the economy in their home country.


We added exposure to short-term bonds because these investments have tended to provide stability during periods of market volatility. We added to long-term Treasury bonds and reduced exposure to other investment-grade bonds, high-yield bonds, bank loans, and emerging market bonds. Many long-term Treasury bonds have experienced volatility over the last year. However, we believe they may offer compelling value at this stage of the business cycle.


Rising interest rates hindered global stock and investment-grade bond performance. 

  • U.S. stocks fell as higher interest rates weighed on corporate earnings outlooks.
  • European stocks fell due to uncertainty in China’s economy, which harmed China’s major trading partners. 
  • Within investment-grade bonds, rising mortgage rates resulted in declines for mortgage bonds. 
  • High-yield bonds gained because higher yields helped overcome price volatility.10 

Within the U.S., utilities and real estate stocks fell the most because of their interest rate sensitivity. Technology stocks also fell as higher interest rates tend to reduce the value of potential future earnings growth. Despite concerns regarding their economy, Chinese stocks performed well within emerging markets, as government interventions likely helped improve their profit outlook. 

Market Performance: Quarter and One-Year 2023 Q3

Past performance is no guarantee of future results. Indexes are unmanaged. It is not possible to invest directly in an index. US stocks are represented by the Dow Jones US Total Stock Market Index, International Developed Market Stocks are represented by the MSCI EAFE Index (Net MA Tax), Emerging Market Stocks are represented by the MSCI Emerging Markets Index (Net MA Tax), Highyield Bonds are represented by the ICE BAML High Yield Constrained Index, and Investment-grade Bonds are represented by the Bloomberg U.S. Aggregate Bond Index. All data is as of 9/30/2023. 


Stocks may rise and volatility is likely to continue.

Stock market turbulence can be unnerving, but a strong job market and robust consumer spending are both positive economic signs. Additionally, analysts have raised their outlook for earnings growth into next year, which could support stocks.

Due to recent market volatility, some investors may feel tempted to exit the stock market. However, it’s important to keep in mind that historically, stocks have tended to rise during late cycle. Should the economy begin to show signs of stalling, we are prepared to adjust risk exposures in client accounts.

We remain diligent in following developments in the U.S. business cycle, earnings outlook, and global geopolitical events. We will use our research capabilities and expertise to help manage risk and seek out opportunities for long-term growth within client accounts.

1. U.S. stocks are represented by the Dow Jones U.S. Total Stock Market Index, international stocks are represented by the MSCI All Country World ex US Index (Net MA Tax), and bonds are represented by the Bloomberg U.S. Aggregate Bond Index, as of 9/30/2023.

2. U.S. stocks are represented by the Dow Jones U.S. Total Stock Market Index, as of 9/30/2023. 

3. Dow Jones U.S. Total Stock Market Index, as of 9/30/2023.

4.  ISM Manufacturing Index (PMI), as of 9/30/2023.

5. Emerging markets include regions like Asia and Latin America and countries like China or Brazil. International developed markets include regions like Europe and countries like Japan or Canada. Emerging markets are represented by the MSCI Emerging Market Index (Net MA Tax) and international developed markets are represented by the MSCI EAFE Index (Net MA Tax), as of 9/30/2023.

6. Bloomberg U.S. Aggregate Bond Index, as of 9/30/2023. 

7. Core managers invest in stocks based on individual company characteristics, rather than favoring sectors or disciplines.

8. Sectors include areas of the market such as health care, industrials, or consumer staples. Disciplines include stock characteristics such as quality, growth, or value. 

9. Based on price-to-earnings ratios for the Russell 1000 Growth Index and the Russell 1000 Index, respectively.

10. High-yield bonds are represented by the ICE BofAML U.S. High Yield Constrained Index, as of 9/30/2023. 

11. Municipal bonds are represented by the Bloomberg Municipal Bond Index and investment-grade bonds are represented by the Bloomberg U.S. Aggregate Bond Index, as of 9/30/2023.

* The CFA designation is offered by the CFA Institute. To obtain the CFA charter, candidates must pass three exams demonstrating their competence, integrity, and extensive knowledge in accounting, ethical and professional standards, economics, portfolio management, and security analysis, and must also have at least four years of qualifying work experience, among other requirements. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. 

Past performance is no guarantee of future results.

Diversification and asset allocation do not ensure a profit or guarantee against loss.

Indexes are unmanaged. It is not possible to invest directly in an index.

The views expressed in the foregoing commentary were prepared by Strategic Advisers LLC based upon information obtained from sources believed to be reliable but not guaranteed. This commentary is for informational purposes only and is not intended to constitute a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The information and opinions presented are current only as of the date of writing without regard to the date on which you may access this information. All opinions and estimates are subject to change at any time without notice.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Foreign investments involve greater risks than U.S. investments, including political and economic risks and the risk of currency fluctuations, all of which may be magnified in emerging markets.

Lower-quality debt securities generally offer higher yields, but they also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.

In general, the bond market is volatile, and fixed-income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed-income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible.

Investments in smaller companies may involve greater risk than those in larger, more well‐known companies.

Index information:

Securities indexes are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds.

Benchmark returns assume the reinvestment of dividends and interest income. Investments cannot be made directly in a broad‐based securities index.

- The Dow Jones U.S. Total Stock Market Index is a float-adjusted, market capitalization–weighted index of all equity securities of U.S.-headquartered companies with readily available price data.

- The MSCI EAFE Index (Net MA Tax) is an unmanaged, market capitalization–weighted index of equity securities of companies domiciled in various countries. The index is designed to represent performance of developed stock markets outside the United States and Canada, and excludes certain market segments unavailable to U.S.-based investors. The index returns for periods after 1/1/1997 are adjusted for tax-withholding rates applicable to U.S.-based mutual funds organized as Massachusetts business trusts.

- The MSCI EM Index (Net MA Tax) captures large and mid-cap representation across 26 Emerging Markets (EM) countries. Emerging market countries include: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. With 1,401 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The index returns for periods after 1/1/1997 are adjusted for tax-withholding rates applicable to U.S.-based mutual funds organized as Massachusetts business trusts.

- Bloomberg U.S. Aggregate Bond Index is a market value–weighted index of investment-grade fixed rate debt issues, including government, corporate, asset–backed, & mortgage–backed securities, with maturities of one year or more.

- The Bloomberg Municipal Bond Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, Insured bonds, and prerefunded bonds.

- The ICE BofAML U.S. High Yield Constrained Index is a modified market capitalization-weighted index of U.S. dollar-denominated below–investment–grade corporate debt publicly issued in the U.S. domestic market. Qualifying securities must have a below–investment–grade rating (based on an average of Moody's, S&P, and Fitch) and an investment–grade–rated country of risk. In addition, qualifying securities must have at least one year remaining to final maturity, a fixed coupon schedule, and at least $100 million in outstanding face value. Defaulted securities are excluded. The index contains all securities of the ICE BofAML U.S. High Yield Index but caps issuer exposure at 2%.

Fidelity® Wealth Services provides non‐discretionary financial planning and discretionary investment management through one or more Portfolio Advisory Services accounts for a fee. Advisory services offered by Fidelity Personal and Workplace Advisors LLC (FPWA), a registered by Fidelity Brokerage Services LLC (FBS), and custodial and related services provided by National Financial Services LLC (NFS), each a member NYSE and SIPC. FPWA, Strategic Advisers, FBS, and NFS are Fidelity Investments companies.investment adviser. Discretionary portfolio management services provided by Strategic Advisers LLC (Strategic Advisers), a registered investment adviser. Brokerage services provided.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

© 2023 FMR LLC. All rights reserved.


How Fidelity Charitable can help

Since 1991, we have been a leader in charitable planning and giving solutions, helping donors like you support their favorite charities in smart ways.

Or call us at 800-262-6039