The FT Wilshire 5000 index successfully navigated its way through debt ceiling brinkmanship, regional bank concerns and hawkish Fed guidance to finish the second quarter strongly - delivering a return of 8.4% in Q2 and a YTD return of 16.3%. The index has also entered 'bull market' territory, up 24.6% from the October 14, 2022, low (see Exhibit 1).
Exhibit 1: The return profile of the FT Wilshire 5000
Source: Wilshire Indexes. Data as of June 30, 2023.
Despite the heavy skew of the contribution of the 'Magnificent Seven' to returns, some sign that the rally is now broadening out
Exhibit 2 shows the contribution to total market returns delivered by seven key stocks. In Q2 the magnificent seven delivered a combined return of 4.8% more than half the total return of 8.4%. A key feature of the rally has been the narrowness of the leadership group.
Exhibit 2: The return contribution delivered by the Magnificent 7
Source: Wilshire Indexes. Data as of June 30, 2023.
Exhibit 3 clearly illustrates the dominance of the technology and digital information sectors in terms of sector weighted performance contributions.
Exhibit 3: The Sector weighted return contributions to the FT Wilshire 5000 in both Q2 and YTD
Source: Wilshire Indexes. Data as of June 30, 2023.
However, there are now encouraging signs of the market rally is broadening out.
Exhibit 4 compares the performance of the standard FT Wilshire 5000 index (which incorporates the full impact of the contribution from the Magnificent 7 and technology sectors) with the performance of an equally weighted index (blue). The pain trade for most investors occurred earlier in Q2 when the headline index moved higher while the equal weighted declined- this marked a major deterioration in market breadth. However, over the last few weeks the equal weighted index has started to recover strongly matching the recovery in the standard index.
Exhibit 4: The Equal weighted index is now rebounding strongly
Source: Wilshire Indexes. Data as of June 30, 2023.
In terms of style rotation, 2023 has all been about the outperformance of Growth v Value reversing the 2022 profile
2023 has witnessed a major reversal in style rotation compared with last year. 2022 saw value significantly outperform Growth but this started to reverse in January. By the close of Q2 the Growth style had delivered a return of 32% compared with a modest return of 4.6% for Value (see Exhibit 5).
Exhibit 5: A significant reversal in Style performance in 2023 vs 2022.
Source: Wilshire Indexes. Data as of June 30, 2023.
MM-399328 E0823
