2023 Market Recap and 2024 Predictions
2023 was a year of many challenges for investors. Aggressive interest rate hikes, fears of recession, regional banks collapsing, and increasingly sticky inflation required investors to stay on their toes. I wanted to recap where we have been, and where we may be headed for 2024.
In March, the market faced higher-than-expected inflation readings and rising rate hike expectations. This, coupled with the unexpected closing of two regional banks sparked widespread concern and the market quickly dropped about 9%. Stocks recovered quickly as investors became more comfortable with the banking sector risk being more localized than systemic. The soft-landing narrative also gained traction, and the S&P 500 performance was almost 17% by the end of June. At this time, technology was overbought, market leadership was particularly narrow, and valuations appeared full, given the economic backdrop. You may remember previous articles referencing the significant overconcentration in both the S&P and Nasdaq indexes as the “Big 7” continued to be the main driver of stock prices. If you did not have significant exposure to Apple, Amazon, Google, Meta, Tesla, Nividia, and Microsoft your portfolio returns were likely significantly muted as other areas of the market struggled to compete with them.
Markets finally took a breather as we entered the month of August and markets sold off for three consecutive months. As November came, we were in a double market correction as both the S&P 500 and Nasdaq were 10% off their previous highs. You may remember that this did not come as a surprise to us as I wrote in November “we were cautious of being overly optimistic in both August and September. In fact, most of our charts were flashing caution for weeks before the drawdown began. We were just waiting for the match to ignite the flame was silently being stoked for weeks.” Markets had gotten too hot too fast and needed to cool off to maintain the ability to eventually move higher.
Momentum arrived in November as evidenced by the 8.9% spike in the S&P 500, the largest monthly increase in 10 years. November broke a streak of three consecutive down months for the S&P 500 and did so in style. We were wondering if there would be any room for the Santa Claus Rally after such a large positive move but December’s performance showed no coal for investors this year as the S&P 500 moved up nearly 4%. The S&P500 finished the year performing just over 26%. The index continues to be extremely concentrated leaving investors wondering how much further it could run in 2024.
While I have no crystal ball, I think market performance is going to greatly depend on whether the Federal Reserve decides inflation has cooled to a point that allows for interest rates to decrease. Lower interest rates and the Federal Reserve finding a way to stick the “soft landing” would allow for additional room to run, even in areas that are considered overvalued. Also, when we look at the age of our current bull market that was born in late 2022, history tells us we may see solid investment performance. Looking back at ever bull market in their second year, the S&P500 has gained an average of 12.6% and has been positive every time. So, the storyline exists that we could see a strong 2024. As we like to say, history doesn’t always repeat, but it usually rhymes. If you have any questions about your current portfolio or investment strategy, please give us a call. We would be happy to help. Happy New Year!
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.