Wall Street Finishes a Strong First Half of 2023. What's Next?

Investors were in a good mood on the last day of June, and major market indexes pushed their way higher by as much as 1.5%. With the gains, the Nasdaq Composite (^IXIC 2.02%), S&P 500 (^GSPC 1.02%), and Dow Jones Industrial Average (^DJI 0.40%) all posted solid returns for the first half of the year, albeit gains that were highly concentrated in certain parts of the market.

Yet with the first six months of 2023 in the books, investors always look forward to what the future will bring. Even after a strong start to the year, some market participants still wonder whether the bear market is truly over. Below, you'll learn more about how the first half went and what could lie ahead for stock market investors.

Big gains for big stocks

Gains for major stock indexes were quite impressive in some cases. The Nasdaq led the way higher in terms of percentage gains, while the Dow lagged behind but still posted a modest advance.

Data source: Yahoo! Finance.

Indeed, the Nasdaq's advance was its best first-half performance in 40 years. That's not too surprising when you look at the best performers among mega-cap stocks:

• Semiconductor chipmaker Nvidia (NVDA 6.18%) posted an advance of 189% during the first half of 2023, buoyed by extremely high demand for its graphics processing chips and other products as enterprise customers try to bulk up their technological firepower to make the best use of new tools like generative artificial intelligence and machine learning.
• Meta Platforms (META 0.43%) posted a 138% gain. The social media giant came into the year with investors worried that CEO Mark Zuckerberg wouldn't have the discipline to cut back on his ambitious plans for metaverse development. However, with Zuckerberg choosing in the end to make 2023 a "year of efficiency," shareholders were quite pleased that Meta chose to concentrate on its more obvious core initiatives while maintaining at least a modicum of control on spending on longer-term projects.
• Lastly, electric vehicle (EV) pioneer Tesla (TSLA -1.11%) climbed 113% in the first half of 2023. Price cuts toward the end of 2022 had raised concerns among investors that demand for Tesla's EVs might be under pressure given adverse macroeconomic conditions. However, the EV company benefited from favorable laws that extended tax incentives for purchasers, and deals with rival automakers to gain access to Tesla's Supercharger network highlighted what could become a lucrative second source of revenue growth for the company.

Other companies also played a role, and many of them were among the biggest businesses in the stock market. Apple (AAPL -0.35%) celebrated a nearly 50% rise in the first half of 2023 by achieving a new milestone on the last day of the period, as its market cap climbed back above the $3 trillion mark.

Can stocks keep climbing?

Trying to focus on what will happen in any six-month period of the stock market is largely a futile exercise. Some analysts are worried that the big move in certain stocks, particularly within the Nasdaq, could be unsustainable. Yet market historians would be the first to point out that market rallies can go on a lot longer than many would consider to be reasonable.

There's still a lot of uncertainty about the future path of the global economy. So far, economic growth has been extremely resilient, avoiding any hint of a coming recession. Yet the bond market is still priced as though a recession were imminent, and the Federal Reserve seems resolute in its intent to defeat inflation at any cost.

Long-term investors should stick to their strategies and not get bogged down with short-term considerations. Regardless of what happens to markets in the rest of 2023, the stock market remains an attractive place to put money to work over the next 10 years and beyond.