Performance | Monday, April 17, 2023

Schwab Intelligent Portfolios & Q1 2023 Market Performance¹

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Key Points

  • The U.S. stock market delivered a strong gain for the second consecutive quarter as large consumer technology stocks rallied.

  • Bonds also rallied across the board as longer-term interest rates eased and the Fed slowed its pace of rate hikes.

  • Gold was the top performer amid economic uncertainty and growing recession fears, while cash continued to deliver solid gains as it did throughout 2022.

  • For Schwab Intelligent Portfolios, Q1 brought the second-consecutive quarter of positive returns following an exceptionally challenging year in 2022.

How did financial markets do in Q1 2023?

The first quarter of 2023 began with a strong rally but ended with renewed volatility. Near quarter-end, the Federal Reserve raised rates another quarter point despite stress in the banking sector spurred by its rapid rate hikes in 2022. While continuing its inflation fight, the Fed also tried to ease bank jitters by stating that "the U.S. banking system is sound and resilient."

Despite the late-quarter turbulence, the U.S. stock market, as measured by the S&P 500 Index, delivered a strong gain for the second consecutive quarter as large consumer technology stocks rallied. International developed market large cap stocks also saw strong gains for the quarter. While riskier equity asset classes, such as small cap stocks, were relatively flat as investor risk appetite moderated amid growing recession fears.

Bonds also delivered solid gains as longer-term interest rates eased and the Fed slowed its pace of rate hikes. Core bonds such as Treasuries, mortgage-backed securities and corporate bonds were among the strong performers. Cash also delivered solid gains as it did throughout 2022, and gold was the top performer amid the economic uncertainty.

On the economic front, overall growth remained positive, although corporate earnings expectations continued to soften. Inflation remained stubborn but continued to ease from its 2022 highs. And unemployment remained at historical lows. 

Figure 1: Market performance (ranked by Q1 2023 total return)


Index total returns (%)

Asset class

Q1 2023


3-Year (annualized)

Gold & other precious metals




International large cap stocks




U.S. large cap stocks




International small cap stocks




Emerging markets stocks




High-yield bonds




Investment-grade corporate bonds




Treasury Inflation Protected Securities (TIPS)




Emerging markets bonds




Municipal bonds




U.S. small cap stocks




U.S. real estate investment trusts (REITs)




U.S. Treasuries 




Securitized bonds




Source: Morningstar Direct, as of March 31, 2023. Performance figures shown are total returns for each asset class during the designated period. Indexes used are: Gold and other precious metals, LBMA Gold Price PM; International developed market Large cap stocks, MSCI EAFE Index; U.S. large cap stocks, S&P 500® Index; International developed market small cap stocks, MSCI EAFE Small Cap Index; Emerging markets stocks, MSCI Emerging Markets Index; High-yield bonds, Bloomberg High Yield Very Liquid Index; Investment-grade corporate bonds, Bloomberg U.S. Credit Index; Treasury Inflation Protected Securities, Bloomberg TIPS Index; Emerging markets bonds, Bloomberg Emerging Markets Local Currency Government Bond Index; Municipal bonds, Bloomberg Municipal Index; U.S. small cap stocks, Russell 2000® Index; U.S. real estate investment trusts, S&P United States REIT Index; U.S. Treasuries, Bloomberg U.S. Treasury 3-7 Year Bond Index; Securitized Bonds, Bloomberg Securitized Index. Past performance does not guarantee future results. Indexes are unmanaged and cannot be invested in directly.

How did Schwab Intelligent Portfolios do?

For Schwab Intelligent Portfolios, Q1 brought a second-consecutive quarter of positive returns. Growth portfolios saw strong gains and were the top performers as stocks delivered solid returns for the quarter despite the volatility. Moderate portfolios saw moderate gains due to their balanced mix of stocks and bonds. And Conservative portfolios also saw solid gains as bonds moved higher.  

Looking ahead to Q2 2023

Looking ahead to Q2, market volatility is likely to remain elevated amid the economic uncertainty. While recession risk is heightened, government action has helped to ease the stresses in the financial system. It remains to be seen whether additional unraveling occurs or whether the Fed is able to thread the needle between concerns about the financial system and current inflation. Despite the uncertainty, it's important to remain focused on your longer-term goals and time-tested investment principles, such as those followed by Schwab Intelligent Portfolios, of investing in a diversified portfolio, rebalancing as markets fluctuate and keeping costs low.

David Koenig CFA®, FRM®, is Vice President and Chief Investment Strategist for Schwab Intelligent Portfolios