Schwab Intelligent Portfolios & Q3 2023 Market Performance¹

October 23, 2023 David Koenig
Financial markets experienced some volatility in Q3 that resulted in flat to slightly negative returns for most portfolios, though all remained strongly positive year to date.
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How did financial markets do in Q3 2023?

Following a strong first half of 2023, financial markets ran into some ups and downs in the third quarter amid rising interest rates, stubborn inflation and a congressional budget battle that threatened a potential government shutdown but was avoided after a deal was reached on the final day of the quarter.

The U.S. stock market, as measured by the S&P 500® Index, saw a bumpy Q3 and ended with a moderate decline for the quarter, though it remained up double-digits YTD due to its strong first half. Small cap stocks saw a larger decline amid the financial pressures, while international stocks moved lower as they faced the additional headwind of a strengthening U.S. dollar. However, both remained strongly positive YTD. Diversification within equities was a benefit as fundamental index ETFs held up better than their market cap-weighted counterparts in all five major equity asset classes.

Bonds were mostly negative for Q3 due to the interest rate pressures. Though less rate-sensitive asset classes such as high-yield bonds eked out a positive gain, again illustrating the benefits of the diversification within Schwab Intelligent Portfolios®. Cash was among the top performers for the quarter amid the volatility, again underscoring why it's an important part of a well-diversified portfolio.

On the economic front, a surge in gasoline prices due to OPEC oil production cuts sparked renewed inflation concerns. However, core inflation moderated further, and the Fed kept its tightening cycle on pause as it tries to thread the needle by bringing down inflation without tipping the economy into a recession. Unemployment ticked slightly higher but remained near historical lows, and economic indicators mostly surprised to the upside as growth remained solid.

Figure 1: Market performance (ranked by Q3 2023 total return)
Asset class
Q3 2023 
[Index Total Returns (%)]
1 Year 
[Index Total Returns (%)]
3 Year Annualized 
[Index Total Returns (%)]
High-yield bonds 0.33 10.40 1.07
U.S. Treasuries -1.19 1.16 -4.10
Emerging markets bonds -1.71 5.85 -1.21
Gold & other precious metals -2.18 11.89 -0.29
Treasury Inflation Protected Securities (TIPS) -2.60 1.25 -1.98
Emerging markets stocks -2.93 11.70 -1.73
Investment-grade corporate bonds -3.01 3.47 -4.83
U.S. large cap stocks -3.27 21.62 10.15
International small cap stocks -3.51 17.90 1.10
Securitized bonds -3.81 -0.04 -4.95
Municipal bonds -3.95 2.66 -2.30
International large cap stocks -4.11 25.65 5.75
U.S. small cap stocks -5.13 8.93 7.16
U.S. real estate investment trusts (REITs) -7.02 3.21 5.76

How did Schwab Intelligent Portfolios do?

For Schwab Intelligent Portfolios, the volatility in Q3 resulted in modestly negative returns for most portfolios, though all remained strongly positive YTD. Growth portfolios saw moderate declines as most equity asset classes were down for the quarter. Moderate portfolios saw slightly smaller declines due to the pressures on both stocks and bonds. And Conservative portfolios were down modestly due to the declines across fixed income. Income-oriented portfolios were also modestly negative, though high-dividend stocks held up better than the broader indexes.

Looking ahead to Q4 2023

Heading into the final quarter of the year, market volatility is likely to remain elevated amid the fiscal and economic uncertainties. Through its combination of people and technology, Schwab Intelligent Portfolios is designed to help you navigate these uncertainties as you work toward your financial goals—through low costs, broad diversification to help mitigate the ups and downs and periodic rebalancing to help keep your risk profile consistent over time. As history has shown, these time-tested investing principles are among the keys to long-term investment success.

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

1 This quarterly commentary is designed to provide you with insight into the market environment during the quarter. How your portfolio performed is dependent upon your asset allocation across the risk spectrum from conservative to aggressive, as well as criteria such as when you opened your account, the timing of any deposits/withdrawals, timing of portfolio rebalances, whether you are enrolled in tax-loss harvesting and other criteria.

Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures related to the Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs.

Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are made available through Charles Schwab & Co. Inc. ("Schwab"), a dually registered investment advisor and broker dealer. Portfolio management services are provided by Charles Schwab Investment Advisory, Inc. ("CSIA"). Schwab and CSIA are subsidiaries of The Charles Schwab Corporation.

Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are designed to monitor portfolios on a daily basis and will also automatically rebalance as needed to keep the portfolio consistent with the client's selected risk profile. Trading may not take place daily.

Diversification, automatic investing and rebalancing strategies do not ensure a profit and do not protect against losses. 

Tax-loss harvesting is available for clients with invested assets of $50,000 or more in their account. Clients must choose to activate this feature.

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