Author

Chris McCall

I grew up watching John Elway of the Denver Broncos pull off several thrilling 4th quarter comebacks to come out ahead by the end of the game. Last year, financial markets looked shaky in the 4th quarter. By late October, international stocks were flat, most US stocks were down, and bonds were also down. Just when it looked like we might have a losing year, a powerful rally began driving markets higher in the last two months of 2023 to end the year with gains across the board.

A Review of 2023

The average gain for stocks within the S&P 500 Index was just shy of 14% (as measured by the S&P 500 equal weighted index) while smaller US companies and companies internationally were up in the 15-20% range. Two of the big stories from last year were technology companies performing better than the markets due to positive developments around artificial intelligence (AI) and the Federal Reserve keeping interest rates high, which led to continued stress in the bond market. However, inflation numbers came down considerably towards the end of the year and a rally in bonds led to a gain of 5.5% for the broader US bond market (as measured by the Bloomberg US Aggregate Bond Index). Volatility was high, but it was a good year overall for those who remained disciplined.

What’s Ahead?

Looking ahead to 2024, many factors went into our thinking for how to best position portfolios. Below are just some of the questions we considered: 

• Will inflation continue to moderate?
• When will the Federal Reserve begin to lower rates and by how much?
• Will corporate earnings justify the market gains we’ve seen in recent months?
• Will AI continue to fuel excitement and provide real growth?
• How will elections impact market psychology?
• What surprises might there be?

With history as our guide, we weigh these questions along with current market expectations to ensure we make thoughtful and prudent investment decisions. By most measures, the market overall looks fairly valued to perhaps slightly overvalued. There are some areas that are cheaper than others and could be a source of above average gains. Smaller companies and those abroad are cheaper than large US companies. Bond yields are still attractive and can provide nice mid-single digit yields, which we’ve not seen in over a decade. Then there’s AI, where technological advances could provide a nice tailwind for growth in the years to come.

When it comes to the final quarter of a game, it’s tough to beat the thrill of seeing a team come from behind to win. With investing, there will also be ups and downs with excitement when things go well and disappointment when things don’t go our way in the short-term. Like sports, you can monitor investments quarter-by-quarter or even year-by-year. However, it’s the long-game that counts and applying a thoughtful and disciplined strategy is what yields results in the long-run.

Journey Beyond Wealth (“JBW”) is an Investment Advisor registered with the SEC. All views, expressions, and opinions included in this communication are subject to change. Registration of an investment advisor does not imply a certain level of skill or training. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. Please contact us if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions.