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Stocks had their own version of March Madness.
In a first quarter full of unexpected twists, fund investors somehow were able to be winners on average. The challenges included the collapse of Silicon Valley Bank and Signature Bank, the capitulation of
and still-high inflation. But many investors looked on the bright side overall, making bets that the Federal Reserve will begin cutting interest rates after its relentless rate-increase campaign to stem inflation.
The average U.S.-stock fund rose 5.6% in the first quarter, after having fallen 18.4% for all of 2022, according to Refinitiv Lipper data. International-stock funds rose 8.4% in the quarter, after having fallen 17.1% last year.
“Between the latest CPI,
failure, potential looming banking crisis, growing recession fears, Fed raising rates…, in March the S&P [index] was like a prizefighter, shaking off all these body blows but not going down on the mat,” says
Derek Amey,
partner and co-chief investment officer at StrategicPoint Investment Advisors in Providence, R.I.
Follow the Money
First-quarter 2023 flow of investor cash by fund type, in billions*
![](https://s.wsj.net/public/resources/images/8501e2ef-1aff-4783-be3d-af2cbb0f6690-IM_MONITORchrt0423_AI2-_300px.jpg)
Bond funds rose as well. Funds focused on investment-grade debt (the most common type of fixed-income fund) rose 3.0% in the quarter, after having fallen an average of 13.5% last year.
Investors remain cautious about U.S. stocks, judging by fund-flow data. They withdrew a net $68.2 billion from bond-focused mutual funds and exchange-traded funds in the first quarter, based on Investment Company Institute estimates. They invested a net $10.6 billion in international-stock funds. Many investors are choosing to park their money in money-market funds, which have seen strong inflows this year.
“The equity performance so far this year has been extremely narrow, concentrated in some very large tech and tech-adjacent companies,” says
Katie Nixon,
chief investment officer of Northern Trust Wealth Management in Chicago. “Seeing stocks like
Meta,
and
gaining 25%, 75%, 19%, and 65% respectively, the market performance was less like a rising tide and more like a tidal wave hitting only a chosen few.”
Mr. Power is a Wall Street Journal features editor in South Brunswick, N.J. Email him at william.power@wsj.com.
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