Patient Capital Management is a Baltimore asset manager founded in 2020 by Samantha McLemore, CFA — Bill Miller's long-time co-manager (working together since 2002, running the flagship Opportunity Equity strategy since 2014). Continuing the Miller-school contrarian tradition, it practices "time arbitrage": exploiting behavioral mispricing to concentrate in controversial growth names (tech, healthcare, Bitcoin-related) at deep discounts to intrinsic value. Its site preserves Bill Miller's complete 1995-2022 market letters, alongside ongoing quarterly letters and webinars.
In the second quarter of 2023, U.S. stocks entered a new bull market (rising more than 20% from their low), but the rally was driven almost entirely by a handful of giant tech stocks—most other stocks lagged. The Federal Reserve paused rate hikes in June, but its “dot plot” (a chart of officials’ rate forecasts) suggests two more hikes this year, so hopes that the tightening is over may be premature. Meanwhile, China’s economy is recovering much more slowly than expected, and its rate cuts aren’t helping much. For ordinary investors, avoid chasing only hot tech stocks, diversify, and be cautious with bonds. Bitcoin gained 7% despite regulatory news, but it’s highly volatile. This report helps you see the real market divide and avoid common pitfalls.
This report discusses global market performance and macroeconomic trends in the second quarter of 2023. The core view is that U.S. large-cap tech stocks led the rally, with the S&P 500 and Nasdaq Composite entering a new bull market, rising 8.7% and 13.1%, respectively. The Federal Reserve raised in
This chapter reviews the performance of major global asset classes in the second quarter of 2023, with a focus on the strong rebound in U.S. equities led by large-cap tech stocks, the trajectory of Federal Reserve monetary policy, and the divergence in economic trends between the U.S. and China. The market environment is characterized by a pronounced "strong U.S., weak China" pattern.
The author's central judgment is that U.S. equities have entered a new bull market (the S&P 500 and Nasdaq Composite have both rebounded over 20% from their lows), but the rally is heavily concentrated in large-cap tech and growth stocks, with severe structural divergence in the market. Meanwhile, the author believes that the pace of China's economic recovery is far weaker than expected, and even interest rate cuts are unlikely to reverse weak demand.
Contrarian Judgments:
1. U.S. Equity Performance: The S&P 500 and Nasdaq Composite have entered a new bull market (rebounding over 20% from their lows). In the second quarter, the Nasdaq Composite rose 13.1%, far outpacing the S&P 500's 8.7% and the Dow Jones Industrial Average's 4.0%. The Information Technology and Consumer Discretionary sectors led for two consecutive quarters, with gains of 17.2% and 14.6%, respectively; the Energy sector fell 0.9%, while the Financial sector rebounded 5.3%.
2. Large-Cap vs. Small-Cap and Style Divergence: Large-cap stocks (Russell 1000 up 8.6%) significantly outperformed small-cap stocks (Russell 2000 up 5.2%) and mid-cap stocks (Russell Mid-Cap up 4.8%). Growth stocks (Russell 1000 Growth up 12.8%) substantially outperformed value stocks (Russell 1000 Value up 4.1%).
3. Federal Reserve Policy: A 25-basis-point rate hike in May brought the rate to 5.00-5.25%, followed by a pause in June (the first since January 2022), but the dot plot implies two more rate hikes within the year. Job growth remains strong, and the Fed's preferred inflation gauge stands at approximately 4.4%.
4. China's Economy: Manufacturing contracted for the third consecutive month, and the non-manufacturing sector weakened in June. High local government debt, weak consumption, a struggling real estate market, and record youth unemployment are creating pressure. Short-term rates were cut in June, but the author argues the move is too modest to materially change demand.
5. Other Assets: Long-term U.S. Treasuries fell 2.4%, and the Barclays Aggregate declined 0.8%. WTI crude oil dropped 6.7% (down 33.2% year-over-year), gold fell 3.7%, and Bitcoin rose 7.0%.
Comparative Data Table:
| Asset/Index | Q2 Return | Notes |
|---|---|---|
| Nasdaq Composite | +13.1% | New bull market |
| S&P 500 | +8.7% | New bull market |
| Dow Jones Industrial Average | +4.0% | — |
| Information Technology Sector | +17.2% | Led for two consecutive quarters |
| Consumer Discretionary Sector | +14.6% | Led for two consecutive quarters |
| Energy Sector | -0.9% | Under pressure |
| Financial Sector | +5.3% | Rebound |
| Russell 1000 (Large-Cap) | +8.6% | Outperformed small and mid-caps |
| Russell 2000 (Small-Cap) | +5.2% | — |
| Russell Mid-Cap | +4.8% | — |
| Russell 1000 Growth | +12.8% | Significantly outperformed value |
| Russell 1000 Value | +4.1% | — |
| Long-Term U.S. Treasuries | -2.4% | Declined |
| Barclays Aggregate | -0.8% | Declined |
| WTI Crude Oil | -6.7% | Year-over-year -33.2% |
| Gold | -3.7% | Declined |
| Bitcoin | +7.0% | Rose |
This chapter does not mention specific company names, focusing instead on indices, sectors, and broad asset class performance. The asset categories discussed include: U.S. equities (large/small/mid-cap, growth/value), U.S. Treasuries, corporate bonds, crude oil (WTI), gold, and Bitcoin.
1. Beware of Market Concentration Risk: The current rally is heavily concentrated in large-cap tech and growth stocks. If the Fed hikes more than expected or tech earnings disappoint, the risk of a market correction is significant. Investors should consider diversifying allocations, increasing exposure to value stocks or small/mid-cap stocks.
2. Monitor U.S.-China Economic Divergence: The U.S. economy has shown surprising resilience, but weak demand in China may drag on global commodity prices and export-oriented companies. The Energy sector (WTI crude oil down 33.2% year-over-year) remains under sustained pressure and should be avoided in the near term.
3. Bond Markets Still Under Pressure: Although the Fed paused in June, expectations of two more rate hikes within the year keep long-end rates elevated, and long-term Treasuries continue to decline. Investors should shorten duration or wait for clearer signals of a rate inflection point.
4. Bitcoin's Countertrend Rally: Despite negative regulatory news (the U.S. government suing Binance and Coinbase), Bitcoin rose 7.0%, demonstrating its low correlation with mainstream assets. It may serve as an alternative allocation option, but high volatility should be noted.